New VAT Threshold 2026 South Africa: SARS R2.3 Million Limit
Updated 24 October 2026 with the latest SARS guidance.
Short answer: the compulsory VAT registration threshold in South Africa is R2.3 million. Since 1 April 2026 SARS only requires you to register for VAT once your taxable business turnover passes R2.3 million in any 12-month period, which is about R191,667 a month. The voluntary VAT registration threshold went up from R50,000 to R120,000, and the VAT rate stays at 15%.
This is one of the biggest changes for small businesses in years. It raises three practical questions: do you have to register, should you register voluntarily, and if you are already registered, should you stay? Here is what changed, what SARS expects from you and what to weigh up.
What changed in the 2026 Budget: the new SARS VAT thresholds
Threshold | Before 1 April 2026 | From 1 April 2026 |
|---|---|---|
Compulsory VAT registration | R1 million | R2.3 million |
Voluntary VAT registration | R50,000 | R120,000 |
VAT rate | 15% | 15% (unchanged) |
Turnover tax limit | R1 million | R2.3 million |
The 2025 plans to raise VAT to 15.5% and then 16% were reversed, so the VAT rate in South Africa in 2026 is still 15%. Only the points at which VAT registration becomes compulsory, or allowed, have moved.
How the R2.3 million VAT registration test works
You add up your taxable supplies: everything you sell that carries 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.
R191,667 a month is the line to watch. If your taxable supplies stay above that every month, you will pass R2.3 million within 12 months.
When and how to register for VAT with SARS
Deadline: apply within 21 business days of the day your taxable supplies pass, or will pass, R2.3 million.
Where: on SARS eFiling, or by booking a virtual appointment on SARS eBooking.
Documents: since 8 December 2025 SARS can ask for outstanding documents by phone or letter. You then have five business days to upload them, or the application is rejected.
Your VAT number: where SARS sees no risk, it can issue your VAT number immediately. Otherwise the application is checked first.
Backdating: voluntary registrations are not backdated, and backdating a compulsory registration on eFiling is limited to six months.
If you would rather not deal with SARS yourself, we handle VAT registration for you, documents included.
Missed the old R1 million VAT threshold?
If your business passed R1 million in taxable supplies before 1 April 2026 and never registered, the new threshold does not wipe that out. SARS may backdate your registration to the date you should have registered, with penalties and interest. The SARS Voluntary Disclosure Programme (VDP) can give relief from penalties if you come forward before SARS contacts you, so speak to an Accountant before you approach SARS.
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 apply to cancel your VAT registration, or stay registered voluntarily. SARS will not cancel it automatically.
Below R120,000: you no longer meet the voluntary threshold either. If you registered voluntarily, SARS may send you a notice that it intends to cancel your registration. If you agree, SARS sets your final VAT period. If you want to stay registered, you can object on form ADR1 within 80 business days of the notice.
How to cancel: apply to SARS on form VAT123e (or VAT123T for a separately registered branch), by email or through a SARS eBooking appointment. Until the final VAT period SARS gives you, keep charging VAT, submitting your VAT201 returns and claiming input VAT. SARS cannot finalise the cancellation while you have outstanding VAT returns or VAT debt.
Exit VAT: the cost of deregistering that most people miss
When you deregister, the VAT Act treats the business assets you still hold as if you sold them. You pay output VAT, called deemed exit VAT, on equipment, furniture, trading stock and property used in the business where you claimed input VAT on them. The value used is the lower of what you paid (VAT included) and what the asset is worth on the market.
Left out: assets used only for exempt supplies, and goods where you could not claim input VAT, such as motor cars and entertainment.
Relief: SARS allows the exit VAT to be paid in six equal monthly instalments.
Claim what you missed: input VAT you never claimed can go into your final VAT return, if you have valid tax invoices and it is within five years. After the final return, no more claims are allowed.
Unpaid suppliers: if you claimed input VAT on a supplier invoice and still have not paid it 12 months after cancellation, you must pay that VAT back to SARS.
Example: a shop deregisters while holding equipment, shelving and stock worth R230,000 (the lower of cost and market value, VAT included). The exit VAT is R230,000 × 15/115 = R30,000, which SARS lets you pay as six instalments of R5,000. Work this out before you apply.
Should you stay VAT registered or deregister?
Reasons 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 hold a lot of equipment or stock. Staying registered means no exit VAT bill.
You plan to grow past R2.3 million soon. Leaving and re-registering later adds admin and can mean price 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 VAT201 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.
VAT registration by industry
Doctors and medical practices: most patients cannot claim VAT back, so a practice under R2.3 million may gain by deregistering. Work out the exit VAT on your medical equipment first. See Accountants for doctors.
Private schools: schools are exiting the VAT system under the 2026 changes to the VAT Act. See Accountants for schools.
Manufacturers: if you sell to VAT-registered businesses and hold machinery and stock, staying registered keeps your input VAT claims and avoids exit VAT. See Accountants for manufacturers.
Restaurants, guesthouses and shops: you sell mostly to consumers, so the choice matters most here. Count your stock, fittings and kitchen equipment before you decide, and note that guesthouses have their own VAT rules for accommodation. See Accountants for restaurants, guesthouses and shops.
See all the industries we specialise in.
What's next: SARS VAT modernisation and e-invoicing
On 17 August 2026 SARS published its VAT Modernisation Consultation Paper. It proposes a Digital VAT Model: tax invoices sent as structured e-invoices through accredited service providers, with VAT data reaching SARS in near real time and, in time, pre-filled VAT returns. The plan runs in phases, with preparation from 2026/27, a pilot in 2029/30 and a phased rollout from 2030, starting with large businesses and reaching small businesses later. Public comments closed on 16 October 2026.
Nothing changes for your VAT returns yet, but keeping your invoicing on cloud Accounting software such as Xero puts you in a better position when e-invoicing arrives.
Not registered and thinking about registering?
From 1 April 2026 you can register voluntarily once your taxable supplies pass R120,000 in 12 months. 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, also look at turnover tax, a simplified tax for micro businesses with 0% on the first R600,000. Turnover tax and VAT are separate systems, so you can use both.
Frequently asked questions
What is the VAT threshold in South Africa in 2026?
R2.3 million in taxable supplies over any 12-month period, from 1 April 2026. The voluntary VAT registration threshold is R120,000.
What is the VAT threshold per month?
About R191,667 a month. If your taxable supplies stay above that level, you will pass R2.3 million within 12 months and must register for VAT with SARS.
What is the VAT rate in South Africa in 2026?
15%. The planned increases to 15.5% and 16% were reversed in 2025, so the rate did not change.
How long do I have to register for VAT?
21 business days from the day your taxable supplies pass, or will pass, R2.3 million in a 12-month period.
Do I have to deregister if my business turnover is under R2.3 million?
No. Between R120,000 and R2.3 million you can choose to stay registered. SARS does not cancel registrations automatically, but it may notify voluntary vendors below R120,000 that it intends to cancel.
Is there a cost to deregistering for VAT?
Yes. You pay exit VAT on the business assets and stock you still hold, based on the lower of their cost and market value. SARS allows it to be paid in six equal monthly instalments.
Which form do I use to cancel my VAT registration?
Form VAT123e, or VAT123T for a separately registered branch, sent to SARS by email or through a SARS eBooking appointment.
Can I be on turnover tax and VAT registered at the same time?
Yes. Turnover tax and VAT are separate systems, and a micro business with business turnover up to R2.3 million can use both.
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, including the exit VAT. 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, with monthly VAT calculations and VAT201 submissions included.
Book a free online meeting with 1% Accounting, or see all our Accounting services for small businesses across South Africa.
Sources: SARS: What is the new threshold for VAT registration?; SARS: Budget 2026 frequently asked questions; SARS: Register for VAT; SARS: Cancellation of VAT registration; SARS: VAT Modernisation Consultation Paper; SARS: Schools exiting the VAT system.
This article is general information based on SARS guidance and the 2026 Budget, current at October 2026. It is not advice for your specific situation.
