To assist you in navigating these changes, CentaTax has developed a VAT Change Checklist—a practical guide to help you assess key areas of focus for compliance and operational readiness.

Beyond this, our team is ready to assist with:

• Comprehensive compliance reviews;
• System audits & updates;
• Contract evaluations; and
• Staff training tailored to your business needs

By completing the checklist, you’ll gain insights into your preparedness, and we can work with you to address any potential gaps.

To access the VAT Change Checklist kindly request a copy by e-mail to info@centatax.com. 

In line with the proposed VAT rate increase, Government proposed to extend the list of zero-rated basic foods effective 1 May 2025, to include edible offal of sheep, poultry, goats, swine and certain cuts as heads, feet, bones and tongues of bovine animals; specific, as well as dairy liquid blend, tinned or canned vegetables.

It is important for vendors to consider the following, which will have an additional financial and compliance burden:

• Pre-increase contractual arrangements and agreements with clients, suppliers and agents which must be amended;
• Changes required to ERP systems, point of sale systems, in-store and electronic advertising, website updates, pricing adjustment, changes to tax invoices and credit notes and implementation of new ERP tax codes;
• Pre-increase ERP test phases to ensure accurate implementation;
• Ensuring compliance where VAT returns are bi-monthly and such tax period includes the old and increased VAT rate;
• The factoring in of the VAT rate increase in determining annual apportionment ratio adjustments;
• The correct VAT application of discounts, rebates and bad debt in respect of transactions prior to the effective rate change date; and
• Application of the VAT transitional rules on the time of supply pertaining to goods and services supplied, with regards to pre- and post VAT rate change. In particular the treatment of transactions in respect of rental agreements, periodic or progressive supply of goods or service, and the sale of fixed property and construction contracts.

Non-compliance or incorrect implementation may result in penalties and interest imposed by SARS.

Other notable VAT proposals

• Value-added tax Debit and credit notes relating to a going concern as per section 8(25) of the VAT Act for returned goods or services to the transferee under section 42 or 45 of the ITA;
• Widening the intermediary provisions in respect of “electronic services” to include supplies facilitated on behalf of local suppliers;
• Reviewing VAT rules dealing with documentary requirements for silver exports;
• Updating the wording of regulation 8(2)(e)(ii) of the Export Regulations;
• Amendment to section 11(2)(l) of the VAT Act in respect of medical trials conducted in South Africa by non-residents;
• Updating the regulations on the domestic reverse charge mechanism relating to valuable metal;
• Reviewing the definition of “insurance” In light of the Capitec Bank court case;
• Clarifying the VAT treatment of temporary letting of residential properties; and
• Reviewing the VAT treatment of airtime vouchers supplied in South Africa for exclusive use in an export country.

Please contact us should you require our assistance with any of the above items or require advisory service in respect of the VAT compliance requirements.

Key Considerations for Vendors

To minimize disruption and ensure compliance, VAT-registered businesses should proactively address the following areas:

• Contractual Agreements: Review and amend existing contracts with clients, suppliers, and agents to account for the VAT increase.
• System & Pricing Adjustments: Update ERP systems, point-of-sale systems, electronic and in-store pricing, advertising materials, tax invoices, and credit notes to reflect the new VAT rate.
• Testing & Implementation: Conduct pre-increase ERP test phases to ensure seamless integration and accurate VAT calculations.
• VAT Return Compliance: For businesses submitting bi-monthly VAT returns, ensure accurate reporting when a tax period includes both the old and new VAT rates.
• Annual Apportionment Adjustments: Factor in the new VAT rate when determining apportionment ratios for annual tax adjustments.
• Treatment of Discounts & Rebates: Apply the correct VAT rate for discounts, rebates, and bad debts related to transactions before the VAT increase takes effect.
• Transitional VAT Rules: Carefully manage the time of supply for goods and services provided before and after the rate change, particularly for:

1. Rental agreements
2. Periodic or progressive supply contracts
3. Fixed property sales and construction contracts
4. Avoid Non-Compliance & Penalties

Failure to implement the VAT rate change correctly could lead to penalties and interest imposed by SARS. Ensuring a compliant transition is critical to avoiding unnecessary financial and operational risks.

If you need assistance with VAT compliance, system adjustments, or advisory services, our team is ready to help. Contact us today to ensure your business is prepared for any potential VAT changes.

The Process of SARS Verification and Its Implications

During the verification process, SARS may issue a “Request for relevant material” via e-filing following the submission of the VAT201 return. If a vendor fails to comply with this request within the stipulated 21 business days, SARS is authorized to issue an estimated assessment for the corresponding tax period.

It’s crucial to note that while vendors can apply for a “Request for suspension of payment” alongside compelling arguments to defer such payment, the option to submit a “Request for Correction” against the estimated assessment is unavailable if there is disagreement with SARS’ estimation. Furthermore, SARS maintains that these estimated assessments are not subject to the standard dispute resolution procedures outlined in the TAA.

Responsibilities Following an Estimated Assessment

Upon receiving an estimated assessment notice through e-filing, the vendor is obligated to provide the initially requested material within 40 business days from the assessment date. In cases where compliance within this timeframe is challenging, vendors may submit a “Request for extension” to SARS, outlining the valid reasons for delay.

The Risks of Non-Compliance: Penalties and Interest

Non-compliance carries financial implications; administrative penalties and interest are levied when VAT is owed to SARS. Therefore, maintaining rigorous VAT compliance and promptly responding to SARS’ requests is essential to avoid the risk of estimated assessments.

Professional Assistance for Compliance

For businesses seeking to ensure full compliance and effective handling of verification requests, CentaTax offers expert services. Our team is dedicated to assisting your business in meeting all SARS requirements efficiently and on time, safeguarding against the complications of non-compliance.