VAT Registration Threshold 2026: R2.3 Million Explained
Short answer: the VAT registration threshold in South Africa is now R2.3 million. Since 1 April 2026 you only have to register for VAT once your taxable business turnover passes R2.3 million in any 12-month period. Before that date the line was R1 million, so if your business turnover is below R2.3 million, VAT registration is now a choice, not an obligation.
This is one of the biggest changes for small businesses in years, and it raises two practical questions: should you register at all, and if you are already registered, should you stay? Here is what changed and what to weigh up.
What changed in the 2026 Budget
Threshold | Before 1 April 2026 | From 1 April 2026 |
|---|---|---|
Compulsory VAT registration | R1 million | R2.3 million |
Voluntary VAT registration | R50,000 | R120,000 |
The VAT rate itself stays at 15%. Only the point at which registration becomes compulsory, or allowed, has moved.
How the R2.3 million test works
You add up your taxable supplies: everything you sell that would carry VAT at 15% or 0% (zero-rated). Exempt supplies, such as residential rent, do not count.
The test looks at any consecutive 12 months, not only your financial year. Once the total goes over R2.3 million, you must register.
You must also register if you have a written contract showing that your taxable supplies will go over R2.3 million in the next 12 months.
Already VAT registered with business turnover under R2.3 million?
Many businesses were registered compulsorily under the old R1 million limit. What you can do now depends on where your business turnover sits:
Between R120,000 and R2.3 million: you can choose to cancel your VAT registration, or stay registered voluntarily.
Below R120,000: you no longer meet the voluntary threshold either, so you would need to deregister.
Cancelling is done by applying to SARS on form VAT123e. SARS then confirms your final VAT period.
The cost of deregistering that most people miss
When you stop being a VAT vendor, the VAT Act treats you as if you sold all your business assets to yourself on the day before deregistration. You must pay output VAT on the assets you still have, such as equipment, vehicles used in the business, furniture and trading stock. The value used is the lower of what you paid and what the asset is worth on the market.
For a business with a lot of equipment or stock, that final VAT bill can be large. Work it out before you apply.
Reasons you may want to stay registered
Your customers are VAT-registered businesses. They claim back the VAT you charge, so VAT does not make you more expensive to them.
You buy a lot of VAT-able goods and services. As a vendor you claim that input VAT back. Once you deregister, the VAT you pay on purchases becomes a cost.
You plan to grow past R2.3 million soon. Leaving and re-registering later adds admin and can cause pricing changes for your customers.
Reasons deregistering may make sense
You sell mainly to consumers, who cannot claim VAT back, so you could keep your prices the same without paying 15% of each sale over to SARS.
Your purchases carry little VAT, so you would lose very little in input VAT claims.
You want less admin: no VAT returns, and simpler invoicing.
There is no single right answer. It comes down to who your customers are, what you buy, what assets you hold and where your business turnover is heading.
Not registered and thinking about registering?
From 1 April 2026 you can register voluntarily once your business turnover passes R120,000. Voluntary registration can suit a new business selling to VAT-registered companies, or one with large start-up purchases it wants to claim VAT on. If your business turnover is under R2.3 million, it is also worth looking at turnover tax, a simplified tax for micro businesses that now also goes up to R2.3 million.
Frequently asked questions
What is the VAT registration threshold in South Africa in 2026?
R2.3 million in taxable supplies over any 12-month period, effective 1 April 2026. The voluntary registration threshold is R120,000.
Do I have to deregister if my business turnover is under R2.3 million?
No. If your business turnover is between R120,000 and R2.3 million you can choose to stay registered. Below R120,000 you would need to deregister.
Is there a cost to deregistering for VAT?
Yes. You must pay output VAT on the business assets you hold when you deregister, based on the lower of their cost or market value.
Which form do I use to cancel my VAT registration?
Form VAT123e, submitted to SARS.
Related guides
Need help deciding?
Our SARS-registered team can look at your business turnover, customers and assets and tell you whether staying registered or deregistering works out better. If you do need to register, we handle VAT registration for you. If you would like monthly VAT, bookkeeping and tax taken care of, see our 1% package: 1% of your business turnover, from R79 a month excluding VAT.
Sources: SARS: What is the new threshold for VAT registration?; SARS: Budget 2026 frequently asked questions.
This article is general information based on SARS guidance and the 2026 Budget, current at September 2026. It is not advice for your specific situation.
