The South African Minister of Finance, Malusi Gigaba, tabled the 2018/19 Budget in Parliament on 21 February 2018. Government announced a lower than predicted 1% increase in the value-added tax (VAT) rate from the current 14% to 15% with effect from 1 April 2018. ENSafrica, Taxand South Africa, explores.
Leaving aside the raging debates over whether the increase was a good move, the impact on the poor and whether zero rating of additional items should be introduced to assist in poverty relief, the reality is that businesses now have just over a month to “V” day!
Given the extensive systems and documentation changes required, this is an extremely short time frame in which to ensure compliance by 1 April. As a transaction-based tax, the tentacles of VAT reach into virtually every area and system in a business. Obviously, the core accounts receivable and payable systems and the general ledger are key. However, the rate change will affect sub-systems, payroll, invoicing, pricing, bad debts and many other operating procedures.
Discover more: Surviving the transition to a 15% VAT rate
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Corporate restructuring negotiations and transactions may be particularly vulnerable to the rate change where they have already been signed but delivery will only take place after 1 April 2018, due to various reasons, including obtaining relevant licences and approvals.
