On 21 February 2018, former Finance Minister Malusi Gigaba delivered the annual budget speech where it was stated that the Value Added Tax (VAT) rate would be increased to 15%, effective 1 April 2018. This marks the first VAT increase since 1993.
You can familiarize yourself with the VAT ACT – just follow the link to download the statute – Download here
What is VAT?
Value-Added Tax is commonly known as VAT. VAT is an indirect tax on the consumption of goods and services in the economy. Revenue is raised for government by requiring certain businesses to register and to charge VAT on the taxable supplies of goods and services. These businesses become vendors that act as the agent for government in collecting the VAT.
Parts of law affected by this VAT change:
- Transitional rules – The transitional rules dealing with a VAT rate increase are contained in s67A
- Goods provided on a periodic basis or services performed over a period
What happens if the goods or services are provided 21 days after 1 April, or the services will be performed after 1 April, the new VAT rate should be charged on the supply of goods or services – 15%. However, there are certain exceptions to this. This rule therefore prevents invoices being raised before 1 April where goods will be supplied more than 21 days after the effective date. KPMG has more on this
SARS has created a very handy VAT change pocketguide to provide clarity to the consumer and business person-alike. Download the pocketguide for reference – provided by SARS LAPD-VAT-G14 – VAT FAQ Increase in the VAT Rate on 1 April 2018 – External Guide
The 1% change seems small but when you start calculating the real effect this change will have on different goods and services it starts to add up. Familiarize yourself with the new change to avoid nasty surprises after 1st April.