- The VAT rate stayed at 15%, but the turbulence left lessons<\/a><\/li>
- VAT apportionment under BGR 16 Issue 3<\/a><\/li>
- Bad-debt relief: when and how to claim<\/a><\/li>
- Invoice compliance and audit-readiness<\/a><\/li>
- Your year-end VAT housekeeping checklist<\/a><\/li>
- Final thoughts<\/a><\/li><\/ul><\/div>\n\n\n\n
\n\t\n\t\t\n\t\t\t\n\t\t\t\t\t\t\t\tPayroll tax pocket guide 2025\/26<\/h2>\n\n\t\t\t\t\t\t\t\t\t
\n\t\t\t\t\t\t<\/p>\n
A complete guide for payroll and HR professionals navigating the latest legislative updates in South Africa.<\/p>\n
<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t
![\"A](\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2026\/02\/Tax-Pocket-Guide-CTA-Image-4-1438x810.jpeg\")
\t\t\t<\/div>\n<\/div>\n\n\n\nThe VAT rate stayed at 15%, but the turbulence left lessons<\/h2>\n\n\n\n
The 2025 Budget Speech proposed a phased VAT increase to 15.5% from 1 May 2025, planned to take effect on 1 May 2025<\/strong>.<\/p>\n\n\n\n
The VAT increase was planned to start on 1 May 2025, but it was reversed by Government Notice on 24 April 2025. <\/p>\n\n\n\n
In practice, SARS said vendors should continue charging 15% from 1 May, not 15.5%, while allowing a short window for businesses that needed time to revert system changes.<\/p>\n\n\n\n
After the increase was announced, it was reversed by notice on 24 April 2025, and the VAT rate remained at 15% from 1 May 2025.<\/p>\n\n\n\n
SARS allowed a short adjustment window until 15 May 2025 for vendors that couldn\u2019t immediately revert to 15% because of complex system changes. <\/p>\n\n\n\n
Where a vendor couldn\u2019t revert in time, SARS said those 15.5% transactions could be accounted for at 15.5% until the system change was completed (no later than 15 May).<\/p>\n\n\n\n
If any supplies were processed at 15.5% during the changeover period (because a vendor couldn\u2019t revert immediately), SARS said those amounts must be reported in VAT201 Field 12 (output tax) and Field 18 (input tax). <\/p>\n\n\n\n
Any related 0.5% adjustments or refunds should also be reflected in those same fields.<\/p>\n\n\n\n
The episode was a useful reminder to keep your VAT setup flexible.<\/p>\n\n\n\n
If guidance changes close to implementation dates, you can update pricing, invoicing, and reporting quickly without disrupting customers or month-end processes.<\/p>\n\n\n\n
Medium businesses should maintain a documented contingency plan covering system updates, transitional invoicing rules, and contract review processes.<\/p>\n\n\n\n
Multiple analysts expect the 2026 Budget to revisit revenue measures given the R75 billion shortfall left by the reversal.<\/p>\n\n\n\n
Several other substantive changes also took effect through the Taxation Laws Amendment Act 42 of 2024.<\/p>\n\n\n\n
The accounting period for imported services was extended from 30 to 60 days.<\/p>\n\n\n\n
Updated Electronic Services Regulations (effective 1 April 2025) introduced a B2B exemption for foreign suppliers whose South African customers are exclusively VAT-registered.<\/p>\n\n\n\n
Section 22(2) was amended to require output tax repayment when debts transferred at face value are later recovered by the transferee.<\/p>\n\n\n\n
VAT apportionment under BGR 16 Issue 3<\/h2>\n\n\n\n
If your business makes both taxable and exempt supplies, Section 17(1) of the VAT Act requires you to apportion input tax.<\/p>\n\n\n\n
The default method is the Standard Turnover-Based Method (STBM) prescribed by Binding General Ruling 16. Issue 3, effective for financial years commencing on or after 1 January 2024, is a fundamental overhaul of the previous two-page ruling, now spanning 18 pages.<\/p>\n\n\n\n
The three-pool approach<\/h3>\n\n\n\n
Every vendor making mixed supplies must categorise input tax into three pools.<\/p>\n\n\n\n
- \n
- Pool 1 covers expenses wholly for taxable supplies (100% claimable).<\/li>\n\n\n\n
- Pool 2 covers expenses wholly for exempt supplies (0% claimable).<\/li>\n\n\n\n
- Pool 3 covers mixed-purpose overheads and shared costs, to which you apply a turnover-based apportionment ratio.<\/li>\n<\/ul>\n\n\n\n
De minimis thresholds simplify the process at the extremes:<\/p>\n\n\n\n
if your ratio is 0.95 or higher, you may claim 100% of Pool 3 input tax. If taxable supplies represent 5% or less, no Pool 3 input tax is claimable.<\/p>\n\n\n\n
What changed<\/h3>\n\n\n\n
BGR 16 Issue 3 introduced 12 categories of exclusions from the ratio calculation, including capital asset proceeds, extraordinary income, and fair value adjustments.<\/p>\n\n\n\n
For non-financial enterprises, investment interest and dividends must be adjusted using specific proxy formulas before they enter the calculation.<\/p>\n\n\n\n
These adjustments prevent passive income from distorting the ratio \u2014 but they add considerable complexity.<\/p>\n\n\n\n
Your tax practitioner or accountant should be involved in getting these right.<\/p>\n\n\n\n
The annual true-up and mandatory SARS reporting<\/h3>\n\n\n\n
Most vendors apply the previous year’s ratio as a provisional figure, then perform a true-up adjustment within nine months of the financial year-end.<\/p>\n\n\n\n
The adjustment is the difference between input tax claimed at the provisional ratio and what should have been claimed at the actual ratio.<\/p>\n\n\n\n
Note 8 of BGR 16 Issue 3 introduced a mandatory annual reporting obligation that many businesses have overlooked.<\/p>\n\n\n\n
At the same time the true-up is reflected, vendors must email SARS (at vatrulings@sars.gov.za) with their registered name, VAT number, apportionment method, and the annual ratio.<\/p>\n\n\n\n
First-time applicants must also submit ratios for the preceding three financial years.<\/p>\n\n\n\n
Common mistakes<\/h3>\n\n\n\n
The most consequential error is failing to apply for an alternative method in time.<\/p>\n\n\n\n
The Supreme Court of Appeal confirmed in Mukuru Africa v CSARS<\/em> (2021) that SARS cannot approve alternative methods retrospectively.<\/p>\n\n\n\n
If the STBM produces an unfair result for your business, you must apply before the relevant year-end.<\/p>\n\n\n\n
Other frequent errors include using gross interest or dividends instead of adjusted amounts, failing to exclude capital asset proceeds, and neglecting the mandatory SARS reporting under Note 8.<\/p>\n\n\n\n
\n\t\n\t\t\n\t\t\t\n\t\t\t\t\t\t\t\tPayroll tax pocket guide 2025\/26<\/h2>\n\n\t\t\t\t\t\t\t\t\t
\n\t\t\t\t\t\t<\/p>\n
A complete guide for payroll and HR professionals navigating the latest legislative updates in South Africa.<\/p>\n
<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t
\t\t\t<\/div>\n<\/div>\n\n\n\nBad-debt relief: when and how to claim<\/h2>\n\n\n\n
Section 22 of the VAT Act lets invoice-basis vendors recover VAT previously paid on debts that become irrecoverable.<\/p>\n\n\n\n
The relief is valuable but technically demanding, and SARS auditors scrutinise claims closely.<\/p>\n\n\n\n
Three conditions must be met<\/h3>\n\n\n\n
You may claim bad-debt relief under Section 22(1) only if a taxable supply was made at the standard rate, you’ve already accounted for and paid the output tax to SARS, and you’ve formally written off the debt as irrecoverable.<\/p>\n\n\n\n
The deduction is calculated as the irrecoverable amount multiplied by the tax fraction (15\/115) and entered in Field 17 of the VAT201.<\/p>\n\n\n\n
A provision for doubtful debts does not qualify.<\/p>\n\n\n\n
The debt must be actually written off, supported by evidence that recovery has been exhausted or the cost of further pursuit exceeds the likely recovery.<\/p>\n\n\n\n
Watch for the 12-month clawback<\/h3>\n\n\n\n
Section 22(3) catches many businesses off guard, and it applies on the debtor side.<\/p>\n\n\n\n
If your business claimed input tax on an invoice-basis purchase and hasn’t paid the full amount within 12 months, you must account for output tax on the unpaid amount \u2014 effectively reversing your input tax claim.<\/p>\n\n\n\n
Finance teams should monitor aged payables specifically for this trigger.<\/p>\n\n\n\n
When you recover a written-off debt<\/h3>\n\n\n\n
Under Section 22(2), any amount recovered after bad-debt relief was claimed triggers an output tax liability in the period the payment is received.<\/p>\n\n\n\n
If your business sells written-off debts to a collection agency, recovery by the transferee now triggers an output tax obligation following the 2024 amendments.<\/p>\n\n\n\n
A worked example<\/h3>\n\n\n\n
A vendor invoices R57,500 (VAT-inclusive at 15%) on 1 March 2025, declaring R7,500 output tax.<\/p>\n\n\n\n
The customer pays R23,000 in June, leaving R34,500 outstanding.<\/p>\n\n\n\n
After exhausting collection efforts, the vendor writes off R34,500 in November 2025.<\/p>\n\n\n\n
The bad-debt relief claim: R34,500 \u00d7 15\/115 = R4,500 in Field 17.<\/p>\n\n\n\n
In March 2026, a collection agency recovers R11,500.<\/p>\n\n\n\n
The vendor must declare output tax of R11,500 \u00d7 15\/115 = R1,500 in the March 2026 return.<\/p>\n\n\n\n
Invoice compliance and audit-readiness<\/h2>\n\n\n\n
SARS’s automated risk-assessment system cross-references every VAT201 submission against pre-set parameters.<\/p>\n\n\n\n
Large refund claims, turnover discrepancies between VAT201 and IT14 returns, and high input-to-output ratios all trigger verification.<\/p>\n\n\n\n
Under Project AmaBillions, SARS has intensified VAT policing specifically to offset the revenue shortfall from the abandoned rate hike.<\/p>\n\n\n\n
What makes a valid tax invoice<\/h3>\n\n\n\n
Under Section 16(2), you may only claim an input tax deduction while in possession of a valid tax invoice.<\/p>\n\n\n\n
For transactions of R50 or less, a till slip showing the supplier’s name and VAT number is sufficient.<\/p>\n\n\n\n
Between R50.01 and R5,000, you need an abridged tax invoice under Section 20(5) with supplier details, serial number, date, description, and VAT amount.<\/p>\n\n\n\n
Over R5,000, a full tax invoice under Section 20(4) is required, adding the recipient’s name, address, and VAT number.<\/p>\n\n\n\n
Missing any required element gives SARS grounds to disallow the claim.<\/p>\n\n\n\n
Credit and debit notes under Section 21 need particular attention.<\/p>\n\n\n\n
SARS has flagged non-compliance with two requirements: a brief explanation of the circumstances, and sufficient information to identify the original transaction.<\/p>\n\n\n\n
Many accounting systems don’t automatically populate these fields.<\/p>\n\n\n\n
Common audit findings<\/h3>\n\n\n\n
The errors SARS finds most often in medium businesses include:<\/p>\n\n\n\n
- \n
- turnover mismatches between VAT201 returns and the IT14 income tax return (the single most frequent escalation trigger),<\/li>\n\n\n\n
- zero-rated supplies not declared in Fields 2\/2A,<\/li>\n\n\n\n
- capital goods input tax misclassified in Field 15 instead of Field 14,<\/li>\n\n\n\n
- missing output VAT on insurance proceeds or asset disposals,<\/li>\n\n\n\n
- motor vehicle private-use clawback not calculated in Field 12,<\/li>\n\n\n\n
- input tax claimed on prohibited items under Section 17(2) like entertainment and club subscriptions,<\/li>\n\n\n\n
- and imported services reverse charge not applied for digital services.<\/li>\n<\/ul>\n\n\n\n
When SARS issues a verification request, you typically have 21 business days to respond.<\/p>\n\n\n\n
Non-response results in an estimated assessment that disallows all input tax for the period.<\/p>\n\n\n\n
\n\t\n\t\t\n\t\t\t\n\t\t\t\t\t\t\t\tPayroll tax pocket guide 2025\/26<\/h2>\n\n\t\t\t\t\t\t\t\t\t
\n\t\t\t\t\t\t<\/p>\n
A complete guide for payroll and HR professionals navigating the latest legislative updates in South Africa.<\/p>\n
<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t
\t\t\t<\/div>\n<\/div>\n\n\n\nYour year-end VAT housekeeping checklist<\/h2>\n\n\n\n
These are the specific actions that prevent audit findings, protect input tax claims, and ensure the apportionment adjustment is correct.<\/p>\n\n\n\n
Reconcile everything before you file.<\/h3>\n\n\n\n
Match your VAT control account to the sum of output and input fields across all VAT201 periods filed.<\/p>\n\n\n\n
Request a VAT Statement of Account (VATSOA) via eFiling and reconcile it to your records.<\/p>\n\n\n\n
Confirm every return shows green status on the VAT Filing Control Table.<\/p>\n\n\n\n
Reconcile total turnover reported across all VAT201 returns to revenue in your annual financial statements, and document every reconciling item in a formal working paper.<\/p>\n\n\n\n
Review and validate input tax claims.<\/h3>\n\n\n\n
Verify a sample of high-value invoices for Section 20(4)\/20(5) compliance.<\/p>\n\n\n\n
Confirm no claims were made on Section 17(2) prohibited items.<\/p>\n\n\n\n
Check all supplier VAT numbers using the SARS VAT Vendor Search tool at secure.sarsefiling.co.za.<\/p>\n\n\n\n
Process the apportionment annual adjustment.<\/h3>\n\n\n\n
Calculate the actual ratio using current-year figures under BGR 16 Issue 3.<\/p>\n\n\n\n
Compare to the provisional ratio applied during the year.<\/p>\n\n\n\n
Process the true-up in the month-8 VAT return. Submit the mandatory annual report to SARS by email.<\/p>\n\n\n\n
Clean up bad debts and change-in-use adjustments<\/h3>\n\n\n\n
Review aged debtors for genuinely irrecoverable debts and process formal write-offs before claiming Section 22 relief.<\/p>\n\n\n\n
Examine aged payables for amounts unpaid beyond 12 months where input tax was claimed \u2014 the Section 22(3) clawback may apply.<\/p>\n\n\n\n
Check the asset register for any change in use and calculate Section 18 adjustments.<\/p>\n\n\n\n
Verify credit notes, imported services, and fringe benefits<\/h3>\n\n\n\n
Confirm all credit notes comply with Section 21(3).<\/p>\n\n\n\n
Check that reverse-charge VAT on imported services has been self-assessed.<\/p>\n\n\n\n
Verify the motor vehicle private-use clawback is calculated and declared in Field 12.<\/p>\n\n\n\n
Prepare your audit file<\/h3>\n\n\n\n
Assemble the following documentation:<\/p>\n\n\n\n
- \n
- VAT201 returns, VATSOA reconciliation,<\/li>\n\n\n\n
- turnover reconciliation,<\/li>\n\n\n\n
- apportionment workpapers,<\/li>\n\n\n\n
- bad-debt documentation,<\/li>\n\n\n\n
- change-in-use calculations,<\/li>\n\n\n\n
- supplier verification records,<\/li>\n\n\n\n
- and SARS correspondence.<\/li>\n<\/ul>\n\n\n\n
Store electronically in South Africa with backup copies.<\/p>\n\n\n\n
This file should be ready to submit within 21 business days of a verification request.<\/p>\n\n\n\n
Final thoughts<\/h2>\n\n\n\n
The businesses that consistently avoid adverse SARS findings share three habits:<\/p>\n\n\n\n
- \n
- they reconcile VAT to financial statements every period,<\/li>\n\n\n\n
- they treat BGR 16 Issue 3 as a live compliance obligation rather than a once-off calculation,<\/li>\n\n\n\n
- and they document everything as if an auditor is already in the building.<\/li>\n<\/ul>\n\n\n\n
SARS has been allocated an additional R7.5 billion for improved revenue collection.<\/p>\n\n\n\n
The time to identify and correct VAT errors is now, before their automated systems flag them for you.<\/p>\n\n\n\n
- VAT apportionment under BGR 16 Issue 3<\/a><\/li>
![\"\"](\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2022\/04\/GettyImages-1181404518-1440x810.jpg\")
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