What Is VAT Registration in South Africa?
Value-Added Tax (VAT) is a consumption tax levied on the supply of goods and services in South Africa. Administered by the South African Revenue Service (SARS), VAT is currently charged at a standard rate of 15%. Businesses that meet certain turnover thresholds are legally required to register as VAT vendors.
Understanding when and how to register for VAT is essential for any business operating in South Africa, particularly small and medium enterprises in East London and the Eastern Cape that are approaching the registration threshold.
The New VAT Registration Threshold (Effective 1 April 2026)
In the 2026 Budget Speech, Finance Minister Enoch Godongwana announced a significant change to the compulsory VAT registration threshold. This was the first adjustment since 2009:
- Compulsory registration threshold: Increased from R1 million to R2.3 million in annual taxable turnover (effective 1 April 2026)
- Voluntary registration threshold: Increased from R50,000 to R120,000 in annual taxable turnover (effective 1 April 2026)
This means businesses with annual taxable supplies below R2.3 million are no longer required to register for VAT, though they may still choose to register voluntarily if their turnover exceeds R120,000.
Who Must Register for VAT?
You are required to register for VAT if:
- Your total taxable supplies have exceeded R2.3 million in any consecutive 12-month period, OR
- You have reasonable grounds to expect that your taxable supplies will exceed R2.3 million in the next 12 months
Registration must be completed within 21 business days of exceeding the threshold. Failure to register on time may result in penalties and interest charges from SARS.
Voluntary VAT Registration
Businesses with taxable supplies exceeding R120,000 per annum (but below R2.3 million) may apply for voluntary registration. This can be beneficial if:
- Your business supplies goods or services to other VAT-registered businesses
- You incur significant input VAT on purchases and expenses
- You want to claim back VAT on business expenses
However, voluntary registration also means you must charge VAT on all taxable supplies, maintain detailed records, and submit VAT returns to SARS on a regular basis.
How to Register for VAT with SARS
The registration process is completed through SARS eFiling or at a SARS branch:
- Gather required documents: Company registration certificate (from CIPC), proof of business address, bank account details, identity documents of directors/members, and proof of taxable supplies
- Complete the VAT101 form: Available on SARS eFiling or at a SARS branch
- Submit supporting documents: Including financial statements or management accounts showing turnover
- Await approval: SARS will issue a VAT registration number upon approval
VAT Return Filing Obligations
Once registered, you must submit VAT returns (VAT201) to SARS. The filing frequency depends on your turnover:
- Category A (monthly): Taxable supplies exceeding R30 million per annum
- Category B (bi-monthly): Most registered vendors fall into this category, filing every two months
- Category C (six-monthly): Available for farming enterprises
Returns must be submitted and payment made by the 25th of the month following the end of the tax period (or the last business day before the 25th if it falls on a weekend or public holiday).
Impact of the Threshold Change on Small Businesses
The increase from R1 million to R2.3 million provides significant relief for small businesses in South Africa. Businesses that were previously required to register can now apply for deregistration if their turnover falls below the new threshold. This reduces administrative burden and compliance costs for smaller enterprises.
However, businesses should carefully consider whether deregistration is beneficial. If most of your clients are VAT-registered businesses, they may prefer dealing with VAT vendors to claim input tax deductions.
How Khwalo and Associates Can Help
Navigating VAT registration, compliance, and returns requires careful attention to detail and knowledge of current SARS requirements. At Khwalo and Associates, our tax team assists businesses in East London and across South Africa with:
- Determining whether VAT registration is required or beneficial for your business
- Completing the VAT registration process with SARS
- Preparing and submitting VAT returns on time
- Managing VAT deregistration applications
- Resolving VAT disputes with SARS
Contact our East London office at 043 726 8134 or email luyanda@khwalo.co.za to discuss your VAT obligations.
