The Big Change: R1 Million to R2.3 Million
From 1 April 2026, the compulsory VAT registration threshold in South Africa has more than doubled — from R1 million to R2.3 million in taxable supplies over any 12-month period. The voluntary registration threshold has also increased, from R50,000 to R120,000.
This is the most significant change to the VAT registration threshold in over a decade. It means that thousands of businesses previously required to register for VAT are now below the compulsory threshold. The VAT rate itself remains unchanged at 15% — the 2025 Budget proposal to increase it to 16% was reversed following political opposition, and the 2026 Budget confirmed it stays at 15%.
Current VAT Registration Thresholds
Here are the old and new thresholds side by side:
| Registration Type | Previous Threshold | New Threshold (1 April 2026) |
|---|---|---|
| Compulsory registration | R1,000,000 | R2,300,000 |
| Voluntary registration | R50,000 | R120,000 |
When Must You Register for VAT?
Compulsory registration is triggered when your taxable supplies exceed — or are reasonably expected to exceed — R2.3 million in any consecutive 12-month period. You do not need to wait for a calendar or financial year-end. The trigger is a rolling 12-month window.
You must apply to register within 21 business days from the date you exceeded (or expect to exceed) the threshold. "Reasonably expected" means if you have signed a contract, won a tender, or have committed orders that will push you over, you must register before the supplies are actually made.
Voluntary registration is available to businesses making taxable supplies exceeding R120,000 in the past 12 months or expected in the next 12 months. Voluntary registration is common for businesses that want to claim input VAT on expenses.
Consequences of Late Registration
Failing to register for VAT when required is a serious compliance failure with escalating consequences:
1. Backdating: SARS will backdate your registration to the date you became liable. You will owe VAT on all taxable supplies from that date — even though you did not charge your customers VAT.
2. Penalties: A 10% late payment penalty on all outstanding VAT from the backdated registration date.
3. Interest: Currently 10.25% per annum on any underpayment, accruing from 2 March 2026.
4. Criminal exposure: Deliberate non-registration can constitute a criminal offence under the Tax Administration Act.
5. Cash flow shock: You effectively owe SARS 15% of your taxable turnover for the entire backdated period — money you never collected from customers.
If you realise you should have registered earlier, consider using the SARS Voluntary Disclosure Programme (VDP) to reduce penalties before SARS discovers the non-compliance.
Should You Deregister Now?
With the threshold increasing from R1 million to R2.3 million, many businesses that were compulsorily registered may now fall below the new threshold. However, deregistration is optional — not mandatory. Before deregistering, consider:
Arguments for staying registered: - You can continue claiming input VAT on business expenses - VAT registration is often perceived as a sign of business maturity and credibility - If your turnover is growing, you may exceed the new threshold soon anyway - Re-registration later requires a fresh application
Arguments for deregistering: - Reduced compliance burden — no more bi-monthly VAT returns - Simpler invoicing (no VAT calculations required) - Prices can potentially decrease for non-VAT-registered customers
Deregistration consequences to be aware of: - You must repay input VAT claimed on capital assets still held at deregistration - You must account for VAT on deemed supplies of goods on hand - You lose the ability to claim input VAT on future purchases
VAT Registration Process — Step by Step
Step 1: Gather required documents — you will need your company registration documents (CIPC), proof of banking details, proof of address, ID documents for directors/members, and evidence of taxable supplies (invoices, contracts, or financial statements).
Step 2: Log in to SARS eFiling and navigate to the VAT registration section, or visit a SARS branch.
Step 3: Complete the VAT registration application form (VAT101).
Step 4: Submit supporting documents.
Step 5: SARS will verify your application. If additional information is required, respond promptly to avoid delays.
Step 6: Once approved, SARS issues your VAT registration number. You must display this on all tax invoices.
Step 7: Set up your accounting system to track input and output VAT. Determine your VAT filing category (most businesses file bi-monthly). Our free VAT Calculator can help you verify calculations.
Compulsory vs Voluntary Registration
Understanding the difference matters for your compliance obligations:
| Aspect | Compulsory | Voluntary |
|---|---|---|
| Threshold | Taxable supplies > R2.3 million in 12 months | Taxable supplies > R120,000 in 12 months |
| Choice | No choice — must register | Optional — you choose to register |
| Time to register | Within 21 business days of exceeding threshold | Any time after meeting minimum threshold |
| Deregistration | Allowed if turnover drops below threshold for 12+ months | Subject to SARS approval |
Impact on Different Business Types
Freelancers and sole proprietors: The increased threshold means most freelancers earning under R2.3 million per year no longer need to register. However, if your clients are VAT-registered businesses, they may prefer you to be registered so they can claim input VAT on your invoices.
Small businesses: Businesses with turnover between R1 million and R2.3 million now have a genuine choice. Consider whether the input VAT savings outweigh the compliance cost. Our Turnover Tax Calculator can help you compare the turnover tax regime with VAT registration.
Professional practices: Accountants, attorneys, and consultants with practices in this turnover range should evaluate carefully. Most professional services have relatively low input VAT (few physical goods), so the compliance burden may not be justified.
Retailers and manufacturers: Businesses with high input costs (purchasing stock, raw materials) benefit more from VAT registration because input VAT claims can be substantial.
Common Misconceptions
"I must deregister now that the threshold went up" — Deregistration is optional, not mandatory. Businesses already registered can remain registered even if their turnover is below R2.3 million.
"VAT registration is free money" — Claiming input VAT comes with significant compliance obligations: bi-monthly returns, detailed record-keeping, and the requirement to issue proper tax invoices. The administrative burden may outweigh the benefit for small businesses.
"The old R1 million threshold still applies" — From 1 April 2026, the new threshold is definitively R2.3 million.
"I only need to register when I hit the threshold" — You must register if you reasonably expect to exceed the threshold in the next 12 months, even if you have not yet done so. A large contract or tender win can trigger the obligation before the revenue is received.