Most competitor guides still cite a R1 million VAT threshold. That changed on 1 April 2026: the compulsory VAT registration threshold in South Africa increased to R2.3 million in taxable supplies — the first increase since 2009. This guide explains what changed, when you must register, how to register on SARS eFiling, how VAT201 returns work, and how VAT differs from provisional tax.
Who This Is For
- Businesses approaching or exceeding R2.3 million in annual revenue who need to understand their registration obligations
- Businesses that were previously registered under the old R1m threshold and are considering whether to deregister
- Early-stage businesses under R2.3m considering voluntary registration to reclaim input VAT on equipment and business expenses
- Business owners who need to explain to clients or funders why they are (or are not) VAT-registered
- Sole traders and small business owners who have never registered for VAT and want to understand the process
The R2.3m VAT Threshold Change (2026)
| Threshold | Before 1 April 2026 | From 1 April 2026 |
|---|---|---|
| Compulsory registration | R1,000,000 | R2,300,000 |
| Voluntary registration minimum | R50,000 | R120,000 |
| VAT rate | 15% | 15% (proposed 16% increase was reversed) |
Compulsory Registration (R2.3m Threshold)
You must register for VAT if your taxable supplies exceed R2.3 million in any consecutive 12-month period. Key points:
- What counts as taxable supplies: the total value of goods and services that are subject to VAT (standard rate at 15% and zero-rated supplies). Exempt supplies do not count toward the threshold
- The 12-month period is rolling: SARS looks at any consecutive 12 months — not just the financial year. If you exceed R2.3m in any rolling 12-month window, you are obligated to register
- Committed future supplies count: signed contracts, won tenders, and firm orders that will generate taxable supplies within the next 12 months are included. Do not wait until you have invoiced the full amount
- Registration deadline: apply for VAT registration within 21 business days of exceeding (or reasonably expecting to exceed) the threshold. Late registration results in penalties and back-dated VAT liability
Voluntary Registration (R120,000 Minimum)
If your taxable supplies are between R120,000 and R2.3 million per year, you may choose to register for VAT voluntarily. Reasons to consider voluntary registration:
- Reclaim input VAT: if you buy equipment, materials, or services that carry VAT, you can reclaim that 15% as input tax against your output tax — a significant cash benefit for capital-heavy businesses
- Sell to VAT-registered clients: corporate and government buyers can only claim input VAT from VAT-registered suppliers. Being registered makes you more competitive in the B2B market
- Credibility signal: some buyers and funders perceive VAT registration as an indicator of business scale and compliance
Reasons not to register voluntarily:
- Price increase for end consumers: you must charge 15% VAT on all your prices, making you more expensive relative to non-registered competitors who sell to price- sensitive consumers
- Compliance burden: bimonthly VAT201 returns and the accounting discipline required to separate input and output VAT adds significant admin — budget for this or hire a bookkeeper
Deregistration Warning: The Deemed Supply Risk
If your revenue is between R1m and R2.3m and you were previously registered under the old threshold, you are not compelled to deregister — you may remain registered. Weigh the deemed supply cost against the ongoing compliance savings before deregistering. Get advice from an accountant before acting.
How to Register for VAT on SARS eFiling
VAT registration is a SARS eFiling process — you do not visit a SARS office. The form you complete is the RAV01 (Registration, Amendment and Verification). The process takes 5 to 21 business days after submission.
- Confirm your VAT obligation
Check that your taxable supplies exceed R2.3m (compulsory) or are above R120,000 (voluntary) in any 12-month rolling period, including signed future contracts.
- Ensure you have an active SARS eFiling profile
Log in at efiling.sars.gov.za. You need an existing income tax registration number (for individuals: ID-linked; for companies: CIPC-registered). Register for income tax first if you have not done so.
- Gather your documents
Company registration certificate (CM1 or COR14.3) or ID for sole traders; bank confirmation letter on bank letterhead; proof of business address (utility bill or lease); income tax reference number.
- Open the RAV01 form
In eFiling: go to Registration, Amendments and Verification in the top menu. Select Value-Added Tax from the tax types list. The RAV01 form will open.
- Complete the RAV01 form accurately
Fill in business details, banking information, estimated monthly taxable supplies (SARS uses this to assign your filing period), and the VAT representative's details. Double- check your bank account number — SARS pays VAT refunds directly to this account.
- Attach documents and submit
Upload supporting documents as PDF. Submit and note your acknowledgement number. SARS may contact you for a verification appointment — attend promptly to avoid delays.
- Track your application
Monitor the status in your eFiling inbox. SARS typically takes 5 to 21 business days, but verification appointments or additional document requests can extend this.
- Start charging VAT from your registration effective date
Once approved, you receive a VAT registration number. Update all invoices to include your VAT number and show VAT separately. Set up your accounting software to track input and output VAT from the effective date.
VAT201 Returns: How Often and When
Once registered, you must file VAT201 returns for every tax period — even if you owe nothing or are in a refund position. Missing a filing attracts an administrative penalty from SARS.
| Category | Frequency | Who qualifies | Due date |
|---|---|---|---|
| B (default) | Every 2 months | Most SMEs — assigned by SARS | 25th of month after period (27th for eFiling) |
| A | Monthly | High-turnover businesses (typically >R30m/year) | 25th of month after period (27th for eFiling) |
| C/D/E/F | 6-monthly, 4-monthly, or annual | Farming, micro-enterprises, and other special sectors assigned by SARS | Varies by assigned period |
SARS assigns your filing category when you register — you do not choose it. Most new registrants are placed in Category B (bimonthly). SARS may reclassify vendors if their turnover changes significantly.
- Category B periods: Jan/Feb, Mar/Apr, May/Jun, Jul/Aug, Sep/Oct, Nov/Dec — six returns per year
- Due date: the 25th of the month following the period end; eFiling submitters have until the 27th. Example: the January/February period closes on the last day of February; the VAT201 is due by 25 March (or 27 March via eFiling)
- Input VAT vs output VAT: your VAT201 calculates the net between output VAT (VAT you collected from customers) and input VAT (VAT you paid to suppliers). If output exceeds input, you pay SARS the difference. If input exceeds output, SARS refunds the difference
- Late filing penalty: R100 to R16,000 per outstanding return depending on annual taxable supplies, levied on the last business day of the month following the due date
VAT vs Provisional Tax: Key Differences
These are two separate taxes that often apply to the same business simultaneously. Many business owners confuse them.
| Aspect | VAT (VAT201) | Provisional Tax |
|---|---|---|
| What it is | Tax collected from customers on SARS's behalf | Income tax paid in advance on your own profits |
| Rate | 15% on taxable supplies | Based on taxable income — same tax tables as for individuals or companies |
| Who pays | The customer (you collect and pass it on) | You, on your own business income |
| Frequency | Monthly or bimonthly VAT201 returns | Two compulsory payments per year (August and February) |
| Trigger | VAT registration (compulsory >R2.3m or voluntary) | Any individual or company earning non-salary income above a small exempt threshold |
| Can they both apply? | Yes — most VAT-registered SMEs also pay provisional tax. They are filed and paid separately. | |
Turnover Tax: The Simplified Alternative for Very Small Businesses
Turnover tax is a simplified tax for micro-businesses with annual taxable turnover below a statutory threshold — also increased to R2.3 million from 1 April 2026. It replaces income tax, capital gains tax, and secondary tax on companies for qualifying businesses.
- Threshold (from 1 April 2026): below R2.3 million in annual turnover
- Key benefit: simpler tax calculation — no income tax return, no provisional tax; a single annual turnover tax return filed with SARS
- Key limitation: businesses registered for turnover tax cannot register for VAT. This means no input VAT recovery and no VAT-registered status — a significant disadvantage for businesses selling to VAT-registered buyers
- Who should consider it: very small sole traders and micro-businesses with predominantly retail/consumer customers who do not require a VAT invoice and where input VAT recovery is minimal
Accounting Software for VAT Compliance
Once VAT-registered, accounting software that automates VAT201 report generation saves several hours per bimonthly cycle. The platforms below all support South African VAT:
- Sage Business Cloud Accounting: best SA VAT integration including direct SARS eFiling support; approximately R240/month (entry plan, 2026 estimate)
- Xero: automated VAT201 reports; manual eFiling submission; approximately R590/month entry plan (estimated from USD pricing at mid-2026 rates)
- Zoho Books: configurable SA VAT; Standard plan at R99/month (confirmed 2026 pricing); includes VAT returns
- QuickBooks Online ZA: SA VAT support; verify current pricing at quickbooks.intuit.com/za
- Wave: free but no SA VAT automation — do not use for a VAT-registered business without significant manual tracking
Frequently Asked Questions
When must a South African business register for VAT?
When your total taxable supplies exceed R2.3 million in any consecutive 12-month rolling period — a threshold effective 1 April 2026. This increased from the previous R1 million threshold that had been in place since 2009. You must apply for registration within 21 business days of exceeding (or expecting to exceed) the threshold. Signed contracts and committed orders count toward the threshold, not only amounts already invoiced.
What changed with the R2.3m VAT threshold in 2026?
Finance Minister Enoch Godongwana announced in the 2026 Budget Speech (25 February 2026) that the compulsory VAT registration threshold increased from R1 million to R2.3 million, effective 1 April 2026 — the first increase since 2009. The voluntary registration minimum also increased from R50,000 to R120,000 per year. Businesses between R1m and R2.3m are no longer compulsorily registered, but deregistration triggers a deemed supply risk — 15% output VAT on all business assets at exit. A proposed VAT rate increase to 16% was reversed; the rate remains 15%.
How do I register for VAT with SARS?
Through SARS eFiling at efiling.sars.gov.za, using the RAV01 (Registration, Amendment and Verification) form. You need an existing income tax eFiling profile, your company registration documents, a bank confirmation letter, proof of business address, and your income tax reference number. SARS typically processes VAT registrations within 5 to 21 business days. See the step-by- step section above for the full process.
How often must I submit VAT returns?
Most businesses file VAT201 returns every two months (Category B, assigned by SARS) — six returns per year. Each return is due by the 25th of the month following the period (eFiling gets an extra 2 days, so 27th). High-turnover businesses may be assigned monthly filing. SARS assigns the filing category when you register — you do not choose it.
What is the difference between VAT201 and provisional tax?
VAT and provisional tax are completely separate. VAT is collected from your customers at 15% on taxable supplies and paid over to SARS via a bimonthly VAT201 return — you are collecting it on SARS's behalf. Provisional tax is income tax you pay in advance on your own business profits, in two payments per year (August and February). Both can apply to the same business simultaneously — a VAT-registered sole trader files VAT201 returns bimonthly AND pays provisional tax twice a year.
Can I voluntarily register for VAT below the threshold?
Yes, from 1 April 2026, voluntary registration is available if your taxable supplies are at least R120,000 per year (raised from R50,000). Voluntary registration makes sense if you buy significant inputs that carry VAT (to reclaim input VAT), or if your clients are VAT-registered and want to claim input VAT from you. The downsides are the 15% price increase for consumers and the compliance burden of bimonthly VAT201 returns.
Next Steps
- Calculate your 12-month taxable supplies
Add up your last 12 months of revenue from VAT-taxable supplies. If this is approaching R2.3m, start preparing to register. Include committed future contracts.
- Decide on voluntary registration if below the threshold
If you are between R120k and R2.3m, weigh the input VAT recovery benefit against the 15% price premium and compliance cost. Get advice from an accountant if unsure.
- Gather your registration documents
Company registration certificate or ID, bank confirmation letter, business address proof, and income tax number. Ensure your eFiling profile is active.
- Register via SARS eFiling or use a bookkeeper
Submit the RAV01 form on eFiling, or hire a registered bookkeeper to handle the registration and track the application on your behalf.
- Set up accounting software for VAT tracking
Before your first VAT201 return is due, ensure your accounting software is configured to separate input and output VAT and can generate a VAT201 report.
Run your books with Sage
Sage Business Cloud Accounting is built for South Africa — SARS VAT and VAT201 support, eFiling integration and local bank feeds. Automate invoicing, expenses and reporting so your books stay compliant.
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