The South African Minister of Finance issued a media statement just after midnight on 24 April 2025, announcing that the proposed value-added tax (VAT)-rate increase will be reversed. (For background, see EY Global Tax Alerts, South African VAT rate set to increase by 0.5% from 1 May 2025 and another 0.5% from 1 April 2026, dated 14 March 2025, and South African VAT rate increase to proceed, dated 4 April 2025.)

Key points made in the media statement include the following.

VAT rate: The VAT rate will remain at 15% from 1 May 2025, rather than being increased as proposed in the March Budget.

Consultations and recommendations: The decision follows extensive consultations with political parties and careful consideration of parliamentary committee recommendations.

Appropriation and Division of Revenue Bills: The Minister of Finance has written to the Speaker of the National Assembly to withdraw the Appropriation Bill and the Division of Revenue Bill, proposing expenditure adjustments to cover the revenue shortfall.

Measures for lower-income households: Measures to cushion lower-income households against the potential negative impact of the rate increase (e.g., the introduction of additional zero-rated products) will now be withdrawn, and other expenditure decisions will be revisited.

Revised bills: The Minister expects to introduce a revised version of the Appropriation Bill and Division of Revenue Bill within the next few weeks.

Implications for businesses

Businesses will need to review their plans and implement necessary adjustments given that the VAT rate will remain at 15%. This process should include evaluating any invoices issued or received at the 15.5% rate and taking appropriate corrective measures.