Online retailers in South Africa are facing a key tax update: the standard VAT rate will rise from 15% to 15.5% on May 1, 2025. This change requires adjustments to pricing, systems, and compliance practices. Here’s how to get your Online store ready quickly and efficiently.
Update Your Systems and Software
Ensure all digital tools used in your business are configured for the new VAT rate. This includes your:
- E-commerce platform
- Accounting and bookkeeping software
- Invoicing systems
POS or ERP systems (if connected)
While many commercial accounting systems will be updated by their accounting vendors, businesses using custom-developed software need to plan for manual reprogramming. Accounting systems should support both the old 15% and new 15.5% rates to account for historical transactions or transitional situations.
Adjust VAT-Inclusive Pricing
Prices displayed on your store must reflect the 15.5% VAT rate from May 1 onward. Since South African prices are VAT-inclusive by default, failing to make this update means absorbing the extra 0.5% yourself. Recalculate your pricing to preserve profit margins, and ensure contracts or agreements don’t restrict VAT-based adjustments. And don’t forget to notify customers of any upcoming price changes in advance.
Review Invoicing and Documentation
From May 1, all tax invoices must reflect the new 15.5% VAT rate for relevant transactions.
Debit or credit notes issued after the change must use the correct VAT rate depending on the original transaction date. Your invoicing system should support this distinction automatically.
Test Transactions After Updates
After making updates, test your checkout and invoicing processes. Run test purchases to ensure the new rate is applied correctly. Double-check quotes, orders, and invoices. Particularly those created near the transition date to confirm accurate tax treatment. Early testing helps you avoid customer disputes or SARS penalties for under-reporting VAT.
Review Pending Orders and Quotes
Quotes and orders placed before May 1 but fulfilled afterward may require adjustments depending on the supply date. Evaluate them individually to ensure VAT compliance under SARS rules.
Keep Accurate and Compliant Records
All invoices and VAT-related documents must be stored in compliance with the Tax Administration Act. Electronic retention is allowed if records are stored in a SARS-compliant format. Ensure your system can generate and archive proper records for audit purposes.
Configure Platform Settings (e.g., Shopify, WooCommerce)
Platforms like WooCommerce allow you to manually configure tax rules. Create a new tax rate effective May 1, and apply it to the correct tax class.
You’ll need to update your tax settings so that VAT is calculated and applied correctly to all sales.
Plan Ahead for the 2026 VAT Increase
This 15.5% rate is part of a phased increase. A further rise to 16% is scheduled for April 1, 2026. By getting your systems ready now, you’ll be in a better position for next year’s transition.
Correcting Errors After May 1, 2025
If you mistakenly apply 15% VAT after May 1:
- Identify affected sales
- Issue debit notes with the correct VAT amount
- Update your accounting records and output tax
- Reflect the corrected figures in your VAT201 return
- Notify customers of the adjustment
If you receive invoices showing 15% VAT after the transition, contact the supplier for a corrected invoice. You may only claim input tax based on the VAT amount charged, even if it’s incorrect.
Where to Get Help
If you’re unsure about any part of the VAT change:
- Visit the SARS website for official guidance and updated VAT guides.
- Consult a tax professional for tailored advice.
- Reach out to your software provider or Accounting partner for technical configuration support.
By acting now, you can ensure your store remains compliant, avoids penalties, and smoothly transitions to the new rate. Stay ahead, stay accurate, and prepare for what’s next.