How South Africa’s budget speech will impact its cross-border transactions

Key fiscal measures introduced

• Value-added tax (VAT) increase

The budget proposes a 0.5% increase in VAT for the fiscal year 2025-2026, with an additional 0.5% hike planned for the following year. This will raise the VAT rate to 16% by 2026-2027.

The VAT hike may lead to higher costs for goods and services, including those involved in cross-border transactions. Businesses engaged in international trade might face increased operational expenses, potentially affecting the volume and value of cross-border payments.

• Cross-border taxation of retirement funds

To prevent double non-taxation, the government plans to tax retirement funds received from offshore accounts, especially where South Africa holds taxing rights by treaty.

South African residents receiving income from foreign retirement funds may now be subject to domestic taxation, impacting the net income from such sources and influencing decisions on cross-border fund allocations.

• Debt and deficit projections

The budget forecasts a consolidated deficit of 5.0% of GDP for the fiscal year ending March 2025, with gross loan debt expected to stabilise at 75.5% of GDP by 2025-2026.

Watch the full budget speech here

Further implications

The 2025 Budget introduces measures that will directly and indirectly impact cross-border payments involving South Africa.  The budget's projections have already influenced the South African rand, which strengthened due to record-high gold prices. Such currency fluctuations can affect the value of cross-border payments, necessitating careful timing and hedging strategies for international transactions.

Country Director Cornelius Coetzee mentioned, “South Africa’s ability to compete internationally is highly dependent on the regulatory and financial environment. The global remittance flows and cross-border B2B trade depend heavily on the smooth and efficient transfer of funds, particularly in light of shifting international trade dynamics. 

The Budget Speech failed to reference how the government plans to deal with increased trade barriers, combined with the VAT hike, indicates a lack of comprehensive trade policy reform. In a world where trade policies are increasingly shaped by regional cooperation and bilateral agreements, South Africa must not only focus on improving domestic infrastructure but also enhance its financial sector and trade policies to adapt to changing global realities,” 

Stakeholders should assess these changes carefully to navigate the evolving fiscal landscape effectively.

Verto simplifies cross-border transactions for businesses and individuals doing business from and with South Africa. With real-time access to competitive exchange rates, low transaction fees, and fast settlement times, we enable seamless foreign exchange (FX) conversions and payments in and out of South Africa.