SA Budget Speech Postponement & Potential VAT Hike – What CFOs Need to Know
The postponement of South Africa’s 2025 Budget Speech has triggered widespread speculation, particularly around a possible VAT increase from 15% to 17%. Given ongoing revenue shortfalls and pressure to fund government expenditure, VAT adjustments could be on the table as National Treasury looks for ways to stabilise the country’s fiscal position.
For large corporates, a VAT rate change is not just a tax increase—it has real implications for cash flow, contractual obligations, compliance, and operational efficiency. If the increase goes ahead, businesses will need to act quickly to assess their exposure and adapt their VAT strategies.
Key Business Considerations
1. Cash Flow & Liquidity Pressures
A higher VAT rate means more capital tied up in tax payments before input VAT is recovered. For businesses with significant exempt or zero-rated supplies, this could create substantial liquidity constraints. Companies will need to reassess their VAT recovery strategies to minimise the impact on working capital.
2. Pricing & Contractual Risk
For businesses with fixed-price contracts or long-term agreements, a 2% increase in VAT could result in unforeseen margin compression if contracts don’t allow for tax adjustments. Reviewing pricing structures and renegotiating contracts where possible will be critical. Sectors with regulated pricing or high price sensitivity—such as retail, automotive, and manufacturing—may find it difficult to pass on the cost, further tightening margins.
3. Compliance & Systems Readiness
Most large organisations still rely on manual VAT processes or fragmented compliance systems, making a rate change more than just a technical update. The shift will require:
ERP & invoicing system adjustments to ensure correct VAT application.
Manual recalibrations of tax calculations for businesses not using end-to-end VAT automation.
Enhanced internal VAT reviews to prevent errors in reporting and transitional compliance.
SARS has been increasing scrutiny on VAT compliance, and companies that fail to update their processes correctly could face audit risks, penalties, or delayed recoveries.
VAT Strategy Matters More Than Ever
With regulatory uncertainty, CFOs and tax teams must be proactive in their VAT planning. Stronger internal controls, better cash flow forecasting, and a shift towards VAT automation will reduce risks and improve financial resilience.
How VATSolve Helps Large Corporates Prepare
Automated Compliance Adjustments: Streamline VAT updates without manual intervention.
Cash Flow & Reclaim Optimisation: Ensure accurate VAT recoveries to mitigate liquidity strain.
Audit-Ready Reporting: Minimise compliance risks and improve accuracy in SARS submissions.
Scalable VAT Automation: Move away from manual processes to reduce errors and improve efficiency.
Whether or not the VAT increase is confirmed, businesses that take a strategic approach to VAT management will be better positioned to handle regulatory changes while optimising financial performance.
Get in touch with VATSolve to future-proof your VAT processes.