South Africa’s Value-Added Tax (VAT) registration thresholds have officially increased with effect from 1 April 2026. The South African Revenue Service (SARS) is already administering all new registrations under these updated statutory limits.
Summary: VAT Registration Threshold Changes
| Registration Type | Previous Threshold | New Threshold (From 1 April 2026) | Measurement Basis |
|---|---|---|---|
| Compulsory VAT Registration | R1,000,000 | R2,300,000 | Taxable supplies in consecutive 12 months (or contractual obligation) |
| Voluntary VAT Registration | R50,000 | R120,000 | Taxable supplies exceeding R120k in 12 months with commercial trading proofs |
1. Compulsory Registration — R2.3 Million
Under the Value-Added Tax Act No. 89 of 1991 (as amended), a person or legal entity carrying on an enterprise is legally required to register for VAT where:
- The total value of taxable supplies (turnover) made in the course of that enterprise has exceeded R2.3 million (R2,300,000) in any preceding consecutive period of 12 months; OR
- There are reasonable grounds (such as a signed, written contractual obligation) to believe that the total value of taxable supplies will exceed R2.3 million in the next 12 consecutive months.
Turnover vs. Net Profit
Important: This limit is determined strictly by taxable supplies (turnover/revenue), NOT business profit. If your gross sales cross R2.3 million in any rolling 12-month period, you have 21 business days from the end of that month to apply to SARS for compulsory registration.
2. Voluntary Registration — R120,000
If your business has not reached the compulsory threshold of R2.3 million, you may still choose to apply for voluntary VAT registration once your taxable supplies exceed R120,000 in a 12-month period.
Voluntary registration offers major commercial advantages, particularly for business-to-business (B2B) suppliers, contractors, and service providers:
- Input Tax Recovery: You can claim back the 15% VAT paid on operational expenses, professional tools, vehicles, software, and stock.
- Corporate Tender Eligibility: Large corporate clients and municipal tenders frequently require valid VAT vendor certificates to award contracts.
- Commercial Credibility: Displays established scale and institutional maturity.
3. Existing VAT Vendors with Turnover Below R2.3 Million
This is one of the most critical considerations for existing clients and business owners: If your company is already registered for VAT and its turnover is between R120,000 and R2.3 million (e.g. R1.5 million), your VAT registration is NOT automatically cancelled.
You have two clear paths:
- Option 1 — Remain VAT Registered: You may continue operating as a registered vendor, submitting your bi-monthly VAT201 returns, claiming input tax deductions, and issuing tax invoices.
- Option 2 — Apply for Voluntary Deregistration: If your customers are retail consumers (B2C) who cannot claim input tax, or if the administrative compliance burden outweighs your input tax recoveries, you can apply to SARS for voluntary deregistration.
4. Important Caution: Exit VAT on Deregistration
Deregistering from VAT requires careful calculation and tax advisory. Under Section 8(2) of the VAT Act, when a vendor ceases to be registered, SARS treats this as a deemed supply:
Exit Tax Formula: You are liable to pay Output VAT (15%) on the lesser of the original cost price or the open market value of all capital assets, vehicles, machinery, and trading stock held immediately prior to deregistration on which input tax was previously claimed.
Before applying for deregistration, always request a comprehensive Exit Tax calculation from your accountant to ensure there are no unexpected cash-flow liabilities.
5. Step-by-Step VAT Registration Process with SARS
SARS reviews all new VAT registrations with strict compliance verification to eliminate fraudulent VAT refunds. Key prerequisites required include:
- Proof of Bank Account: Stamped bank statement or letter not older than 3 months matching registered CIPC company name.
- Proof of Address: Utility bill or valid lease agreement for the enterprise’s business premises.
- Representative Identification: Certified ID copy and SARS Public Officer appointment verification.
- Commercial Invoices & Proof of Turnover: Issued sales invoices and matching bank statement credits demonstrating taxable supplies exceeding R120,000 (for voluntary registration) or exceeding R2.3M / signed contract (for compulsory).
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Frequently Asked Questions
When did the new R2.3M VAT threshold take effect?
The new VAT registration thresholds took effect on 1 April 2026. SARS is actively assessing and issuing all new VAT registrations based on R2,300,000 (compulsory) and R120,000 (voluntary).
Do I have to deregister if my turnover is below R2.3 Million?
No. You are permitted to maintain your active VAT vendor status. Deregistration is entirely voluntary for businesses with turnover between R120,000 and R2.3M.
How long does a SARS VAT registration take?
Once all required proofs (bank confirmation, lease agreement, representative docs, and trading invoices) are submitted, SARS typically issues the VAT Notice of Registration within 3 to 7 business days.