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Change in VAT rate

Budget 2018

Budget 2018




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Budget 2018

You will have noted that the Minister of Finance announced an increase in the VAT rate today, which will apply with effect from 1 April 2018.

The VAT Act contains a number of rules which cater for an increase in the VAT rate. These rules cover, for example, what happens when contracts have been entered into before the date on which the VAT rate is increased but where no invoice has yet been issued or payment received (ie the time of supply for VAT purposes has not yet happened).

We have set out below some examples to show how these rules will work.

  • Should goods have been provided before 1 April, or services performed before 1 April, then the current VAT rate (14%) ie not the new VAT rate of 15% will apply. 
  • Should goods be provided on a periodic basis or services be performed over a period which falls before and after the effective date of 1 April, then an apportionment must be made on a fair and reasonable basis and the 14% VAT rate will apply to the portion before 1 April 2018 and the VAT rate of 15% will apply on the portion of the supply of goods or services from 1 April 2018.
  • Specific rules relate to the sale of fixed property.

What about the circumstances where the time of supply (invoice or payment) fall within the period from the date the Minister announces the increase in the VAT rate (21 February 2018) and ending on 1 April 2018?

If the goods will be provided more than 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 ie 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.

There are several other rules which may have implications and KPMG will be happy to work through these with each of our clients.

© 2020 KPMG Services (Pty) Limited, a South Africa private company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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