South Africa’ has cancelled a planned increase to the value added tax (VAT) rate, originally scheduled for June 1, 2025. The rate was set to rise from 15% to 16%, but the proposal was withdrawn on April 24 following strong public opposition and concerns over the rising cost of living.
The reversal provides short-term relief to households and small businesses but creates operational challenges for companies that had already adjusted billing systems, pricing models, and VAT documentation in anticipation of the change.
“This development highlights the importance of agility in VAT compliance,” said Alex Baulf of Avalara, “especially as South Africa moves ahead with plans for mandatory e-invoicing and broader digital tax transformation.”
The South African Revenue Service (SARS) is now preparing for mandatory e-invoicing by 2028. A public consultation on the legal and technical framework is expected in late 2025. SARS is reportedly considering a Peppol-based 5-corner model, which could support real-time data reporting and pave the way for pre-filled VAT returns.
The move forms part of a wider push to modernise the country’s tax infrastructure and reduce VAT fraud, which is estimated to cost South Africa between ZAR 22 billion and ZAR 50 billion annually.
Baulf noted that international experience — particularly from Europe, India, and Australia — suggests voluntary systems are rarely effective. “Most consultations conclude that standardised, mandatory e-invoicing is necessary to ensure adoption and combat fraud,” he said.
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