VAT Registration Threshold 2026: South Africa R2.3m Limit

Budget 2026 raised South Africa’s compulsory VAT registration threshold from R1 million to R2.3 million in taxable supplies over any consecutive 12-month period, effective 1 April 2026 (SARS: VAT Registration, 2026). Businesses that were previously required to register at R1 million now have more headroom before compulsory registration applies. Voluntary registration remains available once taxable supplies exceed R120,000.

Key Takeaways

Compulsory VAT registration threshold from 1 April 2026: R2.3 million in taxable supplies over any rolling 12-month period.

Voluntary registration threshold: R120,000 in taxable supplies over any 12 months.

Only standard-rated (15%) and zero-rated (0%) supplies count - exempt supplies do not.

The threshold is a rolling 12-month calculation, not a fixed calendar year.

The thresholds from 1 April 2026

Registration type	Threshold
Compulsory VAT registration	Taxable supplies exceeding R2.3 million in any 12 months
Voluntary VAT registration	Taxable supplies exceeding R120,000 in any 12 months

Verify current thresholds with SARS at Register for VAT before making registration or deregistration decisions.

What counts as taxable supplies

Taxable supplies include (VAT Act 89 of 1991):

Standard-rated supplies (15% VAT).
Zero-rated supplies (0% VAT - certain food items, exports, fuel levy goods, some financial services).

Taxable supplies do not include:

Exempt supplies: residential rental income, certain financial services, passenger transport, and some educational services.
Private transactions that are not made in the course of carrying on an enterprise.

A business may have significant total turnover but low taxable supplies if a large portion of its revenue comes from exempt categories.

Impact on businesses previously below R1 million

If your taxable supplies were below R1 million, the threshold change has no immediate impact - you were not required to register before and remain below the compulsory threshold now.

If you were registered voluntarily (taxable supplies between R120,000 and R1 million), you can remain registered or apply for deregistration. Deregistration is not automatic - you must apply, and it triggers a deemed output VAT on the market value of all business assets on hand at the deregistration date (SARS: VAT Deregistration).

Impact on businesses between R1 million and R2.3 million

If your taxable supplies are between R1 million and R2.3 million:

If you were already registered compulsorily (under the old R1 million threshold), you may apply to deregister if supplies are consistently below R2.3 million. Weigh the deregistration output VAT cost against the ongoing compliance burden.
If you were not yet registered, you are now below the compulsory threshold. Voluntary registration remains available if it benefits you commercially.

Impact on businesses above R2.3 million

If your taxable supplies exceed R2.3 million in any 12-month period, compulsory registration is required. You must apply within 21 business days of exceeding the threshold. SARS will register you from the first day of the month following the month in which you exceeded R2.3 million.

Late registration means SARS can hold you liable for output VAT on all taxable supplies from the effective registration date - even if you did not charge customers VAT. The penalty for late registration applies on top of this.

Should you voluntarily register?

Voluntary registration (above R120,000 in taxable supplies) may benefit your business if (SARS: VAT Registration):

Your customers are VAT-registered businesses that can claim back the VAT you charge them.
You have significant input VAT to reclaim on business expenses.
You want to appear credible to corporate clients who prefer dealing with registered vendors.

Voluntary registration is less beneficial if your customers are mostly private individuals who cannot recover VAT and will effectively pay more for your services.

The 12-month rolling window

The threshold is measured over any consecutive 12-month period - not a fixed calendar year or financial year. Monitor your taxable supply total monthly if you are approaching the threshold. The obligation arises the moment the rolling 12-month total exceeds R2.3 million, not at year-end.

A worked example: the rolling window in action

A catering business tracks its taxable supplies month by month. By the end of September, its total for the preceding 12 months (the previous October through September) reaches R2.35 million - over the R2.3 million line for the first time. The obligation is triggered now, not at the February year-end. The business must apply within 21 business days, and SARS registers it from 1 October, the first day of the following month.

Had the owner waited for the year-end to “add up the year”, the business would already be months late - and liable for output VAT on every taxable sale from 1 October, whether or not it charged customers VAT.

”Reasonably expecting” to exceed the threshold

Compulsory registration is not only backward-looking. You must also register if you reasonably expect to exceed R2.3 million in the next 12 months - and “reasonably expect” means on concrete grounds, not optimism. A signed contract, a written agreement, or a firm order that will clearly push you over the line counts; a hopeful sales forecast does not. If you sign a single large contract that guarantees you will cross R2.3 million, the obligation can arise from that contract - before your historical turnover gets there.

How to monitor your position

Keep a running 12-month total of taxable supplies (standard-rated plus zero-rated), updated every month.
Exclude exempt supplies and any income not from carrying on an enterprise.
Set an internal alert well below the line - say R2 million - so one strong month does not catch you out.
If you use accounting software, build a rolling-12-month report rather than relying on the financial-year figure.

Frequently Asked Questions

Do exempt supplies like residential rental income count toward the R2.3 million threshold?

No. Only taxable supplies - standard-rated (15%) and zero-rated (0%) - count toward the VAT registration threshold. Exempt supplies do not count. A business with significant exempt revenue may have a much lower taxable supply total than its overall turnover figure suggests.

If my business was already VAT-registered under the old R1 million threshold, do I need to deregister?

No automatic deregistration happens. If your taxable supplies are consistently below R2.3 million, you may apply to deregister - but deregistration triggers a deemed output VAT on all business assets on hand. Weigh this cost against the ongoing compliance burden of being a VAT vendor.

How is the 12-month rolling window calculated?

At any point in time, look back 12 consecutive months and total your taxable supplies. If that rolling total has exceeded R2.3 million, the compulsory registration obligation is triggered from the first day of the following month. Monitor this total monthly - don’t wait until a financial year-end calculation.

What happens if I exceed R2.3 million but don’t register?

SARS can hold you liable for output VAT on all taxable supplies made from the effective registration date - even amounts you didn’t charge customers. A penalty for late registration also applies. Register within 21 business days of exceeding the threshold.

Sources

SARS: VAT Registration - registration requirements, thresholds, voluntary registration, and deregistration process
VAT Act 89 of 1991, section 23 - the legislative basis for the compulsory and voluntary registration thresholds
National Treasury: Budget 2026 - announcement of the threshold increase to R2.3 million

This guide is for general educational purposes. Budget changes may be subject to legislative confirmation. Verify the current SARS position at sars.gov.za before acting on these figures.