SARS Cracks Down on Businesses That Misfired on 2025 VAT Confusion

Political flip-flop leaves South African companies exposed to tax audits and penalties

What started as a political game of tug-of-war over South Africa’s 2025 budget has ended with the South African Revenue Service (SARS) sharpening its claws, this time for businesses.

After months of mixed messages from politicians about whether or not a VAT hike would happen, SARS is now laser-focused on companies that made the wrong call. And the taxman isn’t in the mood for excuses.

Chaos in the Capital, Confusion in the Market

Between March and April 2025, South Africa’s business community was caught in an extraordinary bind: do you trust what politicians say on talk shows, or do you follow the law?

The National Treasury’s “Budget 2.0”, announced in March, included a 0.5 percentage point increase to VAT—raising it from 15% to 15.5% effective 1 May 2025. While controversial, the hike was lawfully introduced through Section 7(4) of the VAT Act, and passed through Parliament’s budget committees.

But politics soon took over.

Despite voting for the framework that included the hike, some parties like ActionSA and BOSA quickly distanced themselves, issuing public statements implying the increase wouldn’t go through. Even media houses ran headlines declaring the VAT hike “dead” or “unlikely.”

This only added fuel to the fire, with some businesses moving forward to implement the new rate, while others hesitated. Large banks, telecom providers, and e-commerce companies legally bound to act on the existing framework—started notifying clients of the new VAT rate.

Then, just five days before the increase was due, Treasury withdrew the budget and reversed the VAT hike, following a legal settlement with the DA that nullified the votes in favour of the original fiscal framework.

Enter SARS: The VAT Police

The sudden reversal left many businesses in a scramble. But SARS was clear: the VAT rate stays at 15%, and any company that charged 15.5% must correct it or face consequences.

On 25 April, SARS issued a directive telling vendors to immediately revert to 15% VAT by 1 May, giving them until 15 May to update systems and report any exceptions in their tax returns.

A second warning came on 27 April, urging businesses to ensure all May transactions reflected the correct rate. SARS also told customers to hold vendors accountable if overcharged.

And now, the watchdog has gone into enforcement mode.

SARS, with backing from the National Treasury, announced it would actively monitor transactions from May 2025, using its advanced risk engine to flag suspicious VAT reporting and select businesses for audit or verification.

“Any vendor who hasn’t corrected their VAT rate and hasn’t either declared or paid it to SARS or refunded their customer will be penalised,” the Treasury said.

These penalties will be enforced under the VAT Act and the Tax Administration Act, and could range from financial penalties to full-scale audits and even prosecution in severe cases.

A Costly Political Circus for Businesses

South Africa’s business owners are justifiably frustrated. One CFO in Johannesburg told JoburgETC, “We didn’t know whether to listen to Parliament, SARS, or the political noise on TV. It was a mess.”

Some social media users are calling it “the most expensive game of chicken ever played with the economy.” On LinkedIn, tax professionals debated whether SARS should grant leniency for companies who acted in good faith before the last-minute reversal.

But SARS isn’t budging. The law is the law and businesses are expected to have followed the official guidance, not political statements or media spin.

Lesson Learned: Trust the Gazette, Not the Gossip

If this saga has taught South African businesses anything, it’s this: don’t gamble with tax compliance.

While political statements may grab headlines, only Gazetted law and official Treasury announcements hold water when it comes to VAT. And in a country where government U-turns are becoming the norm, businesses will have to be more agile and cautious, than ever.

In SARS’ eyes, confusion isn’t a defence. And come audit time, the only thing that will matter is whether your books got the memo.

{Source: BusinessTech}

Follow Joburg ETC on Facebook, Twitter , TikTok and Instagram

For more News in Johannesburg, visit joburgetc.com