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JOHANNESBURG – First, it was panic. Then it was paperwork. And now? Relief. After a short-lived announcement of a 0.5% VAT increase set to kick in on 1st May, businesses across South Africa can finally hit “delete” on the dozens of urgent emails titled “VAT impact on travel budgets.”

But while the VAT hike may not be going ahead, it did accomplish something unexpected: it forced companies to pause and take stock of their business travel programmes. And that, says Herman Heunes, General Manager of Corporate Traveller, is a conversation worth having.

“The VAT announcement may have been short-lived, but it offered valuable insights into how prepared — or exposed — businesses are when it comes to their travel programmes. A few cents in tax shouldn’t ever derail your travel plans. It’s a wake-up call to optimise.”

For many organisations, the initial rumblings of the VAT increase led to a flurry of internal activity: emails to procurement teams, CFOs questioning budgets, and business travellers suddenly aware of potential new costs on upcoming trips.

“Even though the ruling didn’t go through, the effort companies made to assess the impact hasn’t gone to waste,” says Heunes. “It’s reminded them that there is always room to travel smarter.”

Here’s what the VAT scare highlighted — and why reflecting on these lessons sets companies up for long-term success.

1. It’s Time to Revisit Your Travel Policy 

The last few years have changed travel behaviour drastically. But many businesses haven’t updated their internal travel policies to reflect this. Are you encouraging advance bookings? Do you have clear per diems? Are approvals streamlined and enforced? “The VAT conversation helped remind travel managers just how important a robust policy is,” Heunes explains. “A good policy won’t just keep travellers safe and compliant — it’ll keep costs down too.”

2. The Power of Negotiated Rates

When uncertainty hits — like an unexpected tax — businesses with negotiated supplier rates are best positioned to adapt. Companies working with a Travel Management Company (TMC) like Corporate Traveller enjoy access to pre-negotiated rates that are often VAT-inclusive and protected from short-term market volatility. “We had customers asking how this would impact their hotel bands and rate caps. But those on fixed rate agreements, through us, were in a better financial position — that’s the value of a TMC,” Heunes notes.

3. Read the Fine Print 

If your business uses long-term supplier contracts, the proposed VAT increase was a reminder to read the fine print. Does your agreement include tax clauses? Is it flexible enough to absorb minor shifts in government policy? And if you’re going into an RFP season, are you asking the right questions? Heunes advises: “Plan for contingencies. The next change may not be half a percent — it could be a fuel surge or accommodation levy. Build contracts that safeguard your business.”

Don’t Cut, Optimise 

The biggest takeaway from the VAT stir is this: business travel is still essential. It connects teams, wins deals, and keeps businesses moving. But like every other cost centre, there are always smarter ways to manage it.

“Stopping travel in response to cost pressures is a knee-jerk reaction,” Heunes says. “True resilience lies in reviewing your travel programme holistically, partnering with a trusted expert, and building systems that are agile enough to withstand change — whether that’s VAT, airfare hikes or regulatory shifts.” So while companies may be clicking ‘delete’ on those VAT warning emails — they’d do well to keep the lessons they prompted.

“It is our prayer that President Muhammadu Buhari will go a step further to encourage the National Assembly to pass this Executive Order into law as quickly as possible,” the Airline Operators of Nigeria Chairman, Capt. Nogie Meggison, commented on the news in a statement.

“This is good news for the industry,” says also Adeshole Kayode, Director of Capstone Travels and Vice President of the National Association of Nigeria Travel Agencies (NANTA-Abuja Zone).

According to Kayode, Nigerian Travel Agents have complained of ‘double taxation’ for years but nobody ever took notice, until now. He explains airlines deduct WithHoldingTax (WHT) directly at the point of ticket sales. Despite the airlines already collecting taxes, the Tax Office requires Travel Agents to pay as well, resulting in double taxation for Travel Agents.

Says Kayode: “The VAT issue has lingered for years with nobody able to fathom exactly how these taxes are being calculated or who is exempted to pay. This issue has over the years generated a lot of controversies between the Tax Office and the Travel Agent.”

“This removal of VAT on transportation by the President through an Executive Order is a welcome development that calls for celebration. To me as NANTA executive, it’s a very welcome development. The good news also comes at the perfect time, as we are professionalising the industry.”

Also for domestic airline operators and travellers, the removal of VAT is good news, adds Kayode. He explains we are likely to see reduced airfares in the near future. He explains many Nigerians still view flying as reserved to the elite. More affordable flights will boost domestic travel, according to Kayode.

Regarding the treatment of existing reservations with stays or activities from 1 April 2018 onwards, SANParks consulted South African Revenue Services (SARS) for guidance. “As we are a public institution with many loyal local and international guests, it was important to ensure that we make the correct decision,” says Dumisani Dlamini, SANParks Chief Financial Officer. “SANParks has a unique business model in the way that reservation of accommodation is secured in national parks,” he continues. This business model was discussed in detail with SARS officials earlier this week.

According to Dlamini, SANParks therefore will be requesting guests with reservations, with stays (or activities) from 1 April 2018 onwards, to pay the difference as a result of the increased VAT rate. “In order for SANParks to execute its conservation mandate effectively, we have no choice, but to pass this increased statutory rate on to our guests,” he indicates.

SanParks goes on to say that the business model can be summarised as follows: After making reservations for national parks, guests are provided a provisional reservation through the “Deposit Request Letter”. Once deposits are received, whether immediately or by stipulated due date, such funds are transferred to a liability account in SANParks’ accounting records and are not processed as revenue. This is primarily so due to the fact that significant numbers and value of reservations are cancelled or amended before arrival date and refunds are processed in accordance with the terms and conditions relating to cancellations and amendments. Even if the full value of booked inventory is paid as the deposit, which in most cases is required, the amount is still regarded as a deposit and processed accordingly.

Once guests arrive in the national parks, and from an accounting perspective, revenue is applied from this deposit on a daily basis (in case of overnight reservations as well as other inventory (e.g. activities, conferencing, etc.)) and processed as revenue. It is at this stage, in other words during stay, that VAT then becomes liable. Further it is only at the end of the reserved itinerary that a tax invoice is generated and provided.

The current rates from 1 April 2018 onwards (for accommodation, activities, conferencing, conservation fees and WILD Card membership) have already been updated on the reservation system to include the additional 1% VAT. Guests with existing reservations with stays (or activities) from 1 April 2018 onwards, will be contacted and provided with updated documentation for their provisional or confirmed reservations. Updated documentation will reflect the revised reservation cost and outstanding balance. In instances where reservations were fully paid previously, guests can pay the difference, either on arrival in the relevant park or through the usual payment channels before arrival.