South Africa's National Treasury Department has confirmed that the Value Added Tax (VAT) tax rate remains at 15% and has stopped the proposed increase that has sparked concerns across the tourism and hospitality industry. This reversal follows Finance Minister Enoch Godonwana's decision to withdraw plans for a 0.5% VAT rise in May 2025, followed by a decision to withdraw another VAT rise in 2026. The change will be formalized through future laws and will provide relief to businesses that cater to both domestic and international travelers.
The decision leads to a negotiated settlement in accordance with legal and political pressures, including court applications by democratic alliances and support from economic freedom fighters. As a result, the Ministry of Finance recognized a medium-term fiscal gap of R75 billion, but the move provides stability to the tourism industry. Industry leaders have welcomed development, citing important roles in job creation and economic recovery.
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