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 sars.gov.za/businesses-and-employers/vat/vat-registration/ 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.
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
Related guides
- How to Register for VAT in South Africa: A Step-by-Step Guide
- Voluntary vs Compulsory VAT Registration in South Africa
- South African Tax Law Changes 2026: What to Update
- Small Business Corporation Tax in South Africa: The SBC Rate Explained
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.