VAT registration in South Africa: the new R2.3 million threshold and whether to stay registered

What changed on 1 April 2026

Value-Added Tax (VAT) is charged at 15% on most goods and services in South Africa, and that rate has not changed. What changed is who has to register. The Minister of Finance announced the increase in the Budget on 25 February 2026, and it is the first change to the compulsory threshold in 17 years.

The South African Revenue Service (SARS) has been processing registration applications on the new thresholds since 1 April 2026. Its own Budget FAQ, last updated in August 2026, adds that the amending legislation was still going through Parliament. Check the SARS VAT page for the current position before you act on any of this.

Who must register now

You must register when your taxable supplies pass R2.3 million in any consecutive 12 months, or when it is reasonable to expect they will in the next 12 months, for example because of a signed contract.

• Zero-rated supplies count. Sales taxed at 0%, such as exports, are still taxable supplies.
• Exempt supplies do not count. Residential rent and most financial services are examples.
• A quick test. R2.3 million a year is about R191,667 a month. SARS says that if you have been above that and have no reason to expect it to change, you are likely liable to register.

If you are over the line and not registered, SARS may backdate your registration to the date you became liable, with penalties and interest. SARS charges interest of 10.25% a year on late or underpaid tax from 2 March 2026. The Voluntary Disclosure Programme (VDP) can reduce penalties, but only if you apply before SARS starts an audit or inquiry.

How to register for VAT, step by step

To register, you apply to SARS on the VAT 101 Value-Added Tax Registration Application form. Most businesses apply online through SARS eFiling. These are the steps, in order.

1. Check that you qualify. Registration is compulsory once your taxable supplies pass R2.3 million in any 12 months, or you reasonably expect them to. You may register voluntarily once your supplies have passed R120,000 in the last 12 months.
2. Get your documents ready. Published guidance says SARS typically asks for the entity’s registration documents, ID and proof of address for the public officer or responsible person, recent bank statements and proof of turnover. Missing or incorrect documents delay the application.
3. Make sure your tax affairs are in order. SARS can reject an application if the business or its public officer is not tax compliant, so fix any outstanding returns first.
4. Submit the application. Use SARS eFiling. If you cannot, book an appointment with SARS.
5. Answer SARS quickly. SARS may phone or write to ask for missing documents. You have five business days from the date of its letter to upload them, or the application is rejected automatically.
6. Wait for your VAT number. Published guidance has put eFiling applications at about 21 working days, but this varies. Once you are registered you must charge VAT, issue tax invoices and file VAT201 returns.

Registering voluntarily is a commitment: you must charge VAT and file returns for as long as you are registered. Weigh that against the input VAT you can claim before you apply.

If you are already registered

There are three cases.

1. Taxable supplies below R120,000 in the past 12 months. SARS will notify you that it intends to cancel your registration. It will do this once the legislation is promulgated. If you disagree, you can object within 80 business days of the notice.
2. Between R120,000 and R2.3 million. Nothing happens automatically. You choose whether to stay registered or apply to cancel.
3. Above R2.3 million. You stay registered.

Until SARS confirms your final tax period, you must keep charging VAT and submitting VAT201 returns.

Should you deregister? Four questions

Being allowed to leave does not mean you should. SARS itself tells vendors to weigh the exit VAT bill, whether customers prefer to trade with VAT vendors, and the input tax they would stop claiming.

1. Who are your customers?

If most of your customers are consumers, they cannot claim VAT back. Deregistering lets you keep the 15% you were paying over, or cut your prices and stay competitive.

If most of your customers are VAT vendors, they claim the VAT on your invoices back. If you deregister and keep the same price before VAT, they pay the same net amount, but you lose the input tax you used to claim on your own costs. To make that up you would have to raise prices, which costs them more.

2. How much input VAT do you claim?

The more VAT you pay on stock, equipment, rent and services, the more you give up by leaving. A business with high VAT-bearing costs and low margins usually stays.

3. What is the exit VAT bill?

When you cancel, you are treated as if you supplied the assets and trading stock you still hold, so you owe output VAT on them. The value used is the lesser of cost and open market value.

• It covers assets on which you claimed input tax, such as equipment, furniture, stock and business property.
• It excludes items where input tax was denied, such as entertainment and motor cars.
• SARS allows the bill to be paid in six equal monthly instalments, though it notes a regulation could extend that.

4. Will you cross the line again?

If you are close to R191,667 a month, cancelling and then re-registering costs time and can leave you exposed. Look at the last 12 months and the next 12 before you decide.

A worked example

The same business, three outcomes. It has R1.8 million of taxable supplies a year (before VAT) and R1.2 million of costs that carry VAT (before VAT). This is a simplified illustration.

In the consumer case the shop keeps its shelf prices, so the VAT it used to pay over stays in the business. In the VAT-vendor case the business keeps its price before VAT, so it absorbs the VAT it can no longer claim. The example ignores the one-off exit VAT, any saving in admin time, and the risk of losing customers who prefer VAT-registered suppliers. The rule behind the table is set out in our working paper, Should you deregister for VAT?, which we want you to challenge.

Turnover tax: the other option

Turnover tax is a simplified regime for micro businesses, and its turnover limit also rose to R2.3 million on 1 April 2026. Under the new tables the first R600,000 of turnover is taxed at 0%.

It is not open to everyone. A business does not qualify if more than 20% of its receipts come from professional services, if it is a personal service provider or labour broker, or if more than 20% of its receipts are investment income or rent. Companies also need to have only natural persons as shareholders. Turnover tax and VAT are separate systems, so you can be on both.

This article is general information for South African businesses. It is not tax, legal or financial advice, and it reflects the rules and figures at the date shown above. Tax rules change, so confirm the current position before you act. TBL's practitioners are registered tax practitioners.