Business

SARS Tightens VAT Rules: What South African Businesses Must Do in 2025

Published

3 hours ago

September 22, 2025

Chiraag

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New rules for VAT vendors

South African businesses registered for VAT face a fresh compliance hurdle in 2025. The South African Revenue Service (SARS) has rolled out updated obligations through Binding General Ruling 16, known as BGR16 Issue 3. This ruling, which took effect for financial years starting on or after 1 January 2024, changes how vendors calculate and report their VAT apportionment.

The update introduces stricter processes, with SARS making it clear that vendors will no longer be able to avoid detailed reporting. For many businesses, particularly those dealing with both taxable and exempt supplies, the adjustment could significantly affect how they manage their tax affairs.

The true-up adjustment explained

At the heart of the new rules is something SARS calls a “true-up adjustment.” In practice, this means businesses must reconcile the difference between provisional VAT calculations and their final annual figures. The correction must appear in the VAT return for month eight, which is submitted at the end of month nine, after a company’s financial year-end.

For example, a business with a December 2024 year-end will need to declare its adjustment in the August 2025 VAT return, due by the last working day of September 2025. Missing this step could trigger penalties and put a company at risk of being flagged as non-compliant.

Mandatory reporting requirements

Alongside the adjustment, vendors are now obliged to submit supporting information directly to SARS by email. This includes the company’s registered name, VAT registration number, apportionment method and formula used, as well as the final annual ratio.

What makes the requirement even tougher is that businesses applying the formula for the first time must also provide SARS with their apportionment ratios and formulas for the previous three financial years. For many smaller businesses, this retrospective detail may come as an unwelcome surprise.

Why it matters for businesses

While large corporates often have in-house teams to deal with complex tax matters, smaller businesses could feel the strain. The new obligations demand not just careful record-keeping but also technical understanding of how VAT apportionment works. Tax experts have already cautioned that the compliance burden will grow, and professional guidance may be unavoidable for many.

The changes are especially significant for companies engaged in mixed activities, such as financial services, property, or education providers. In these cases, calculating taxable and exempt supplies accurately has always been complicated, and SARS’ tightening of the rules raises the stakes.

Looking ahead

The first true-up adjustments and mandatory reports will be due in September 2025. Businesses that act early, keep meticulous records, and seek expert advice will be better positioned to avoid disputes with SARS.

Ultimately, SARS’ move aims to close loopholes and ensure a more consistent approach to VAT across the country. For businesses, the message is clear: compliance is no longer optional, and 2025 is the year to get it right.