When Must Your Business Register for VAT? The New R2.3 Million Threshold, Explained

The short version: two thresholds and one deadline

VAT registration in South Africa is not a judgement call once your turnover gets big enough — it is a legal trigger. The Value-Added Tax Act sets a compulsory threshold, and the moment you cross it the clock starts running whether you have noticed or not. From 1 April 2026 that threshold moved for the first time in years: compulsory registration now applies when the total value of your taxable supplies exceeds R2.3 million in any consecutive 12-month period, up from R1 million. The voluntary threshold moved at the same time, from R50 000 to R120 000.

The standard VAT rate remains 15%. That number matters more than most owners expect, because if you register late SARS does not simply ask you to start charging VAT from today — it treats you as having been a vendor since the day you crossed the line, and the money you already banked is treated as having included VAT all along.

Compulsory registration: R2.3 million in any consecutive 12 months

Read that phrase carefully, because almost every mistake starts here. The test is any consecutive 12-month period. It is not your financial year, not the calendar year, and not the year SARS assesses you on. It is a rolling window. If the twelve months from, say, 1 May 2026 to 30 April 2027 produce R2.35 million of taxable supplies, you were liable in that window even if neither of your financial years shows R2.3 million on its own.

What counts towards the threshold is taxable supplies — supplies made in the course of an enterprise that are either standard-rated at 15% or zero-rated. Zero-rated does not mean excluded: an exporter whose sales are all zero-rated still counts every rand towards R2.3 million. Exempt supplies, such as residential rent or the provision of certain financial services, do not count. Nor does the sale of a capital asset like a delivery vehicle you are replacing.

There is a second trigger that catches people who are nowhere near R2.3 million yet. SARS applies compulsory registration where, in terms of a written contractual obligation, the value of taxable supplies to be made in a 12-month period will exceed R2.3 million. Sign one large multi-year supply contract and you can be liable to register before you have invoiced a cent. This is the trap that catches new suppliers who have just won a tender — and if you are going down the government-supply route, the same paperwork discipline you needed to get onto the Central Supplier Database applies here.

Once liable, you must apply for registration within 21 business days from the date the R2.3 million is or will be exceeded. Business days, not calendar days — but that is still roughly a month, and the date the clock starts is the date you crossed the threshold, not the date you realised you had.

What changed on 1 April 2026 — and what it means if you are already registered

The increases were announced in the February 2026 Budget and took effect on 1 April 2026. For a business currently turning over, say, R1.4 million, the practical effect is significant: under the old rules you were compelled to be a vendor; under the new rules you are not.

That does not mean your registration disappears. Deregistration is not automatic. A vendor whose taxable supplies will be less than R2.3 million in any consecutive 12-month period may request cancellation, but SARS will not do it for you simply because the threshold moved. Where a vendor's supplies fall below R120 000 over the preceding 12 months, SARS will notify you of its intention to cancel your registration — and if you want to stay registered you can object using a Notice of Objection (ADR1) within 80 business days.

So if you sit between R120 000 and R2.3 million you now have a genuine choice, and it is worth making deliberately rather than by inertia. Staying registered keeps your input tax claims alive and keeps you credible with VAT-registered customers who want a valid tax invoice. Deregistering removes a filing obligation and, if you sell mainly to consumers, lets you cut up to 15% off your shelf price without losing margin — but you give up the input tax you were claiming on your costs, so run both sides of that sum before you decide.

Voluntary registration: R120 000, and when it is actually worth it

Below the compulsory threshold you may register voluntarily where the value of taxable supplies made or to be made is less than R2.3 million but has exceeded R120 000 in the past 12 months. Special categories — municipalities, welfare organisations, someone acquiring a going concern, and entities meeting the relevant regulations — can register without meeting that minimum.

Voluntary registration pays when your customers are themselves VAT vendors and your costs carry meaningful input VAT. A B2B services firm buying laptops, software subscriptions and office space recovers the 15% on those purchases, and its clients do not care about the VAT it adds because they claim it back. It rarely pays when you sell to consumers: a R2 300 price becomes R2 645, or you absorb the difference out of your own margin.

SARS also attaches conditions to voluntary vendors and will move to cancel a registration where the vendor has no fixed business address, does not keep proper accounting records, or has no business bank account. That last one is not a formality — if you have been running the business through a personal account, sort that out first; our guide to the best business bank accounts in South Africa covers what the banks ask for and what the monthly fees actually come to.

A worked example: the R2.4 million consultancy

Assume a Pty Ltd consultancy invoices roughly R200 000 a month. By month twelve its rolling 12-month taxable supplies sit at R2.4 million — but the threshold was crossed earlier than that. Working the rolling total forward month by month, it passed R2.3 million during month twelve, say on 18 November. That date, not the year-end, is when liability arose, and the 21-business-day application window runs from it — expiring in mid-December.

Register on time and the consultancy simply starts charging 15% on invoices issued from its effective registration date, claims input tax on its costs, and files a VAT201. Miss it, and by the time SARS picks it up in the following year's assessment the business owes output VAT on every invoice issued since 18 November — out of money it has already spent, because it never charged the VAT to the client in the first place. On R800 000 of invoicing at the 15/115 tax fraction that is roughly R104 000 of output tax, less whatever input tax it can substantiate. You can sanity-check the arithmetic on your own numbers with our VAT calculator.

What being a vendor actually costs you in time

Registration brings a filing rhythm. Most vendors are placed in Category A or Category B and file every two calendar months. Category C — one return every calendar month — applies where taxable supplies exceed or are likely to exceed R30 million in any consecutive 12-month period. Category D is a six-month period for farming enterprises with supplies under R1.5 million a year and for micro businesses registered under the Sixth Schedule to the Income Tax Act. Category E runs every 12 months and covers certain companies, trusts and connected-person letting arrangements.

Deadlines depend on how you file. Vendors paying manually through a bank must submit the VAT201 and pay by the 25th of the month following the end of the tax period. Vendors using eFiling and EFT have until the last business day of that month. Late payment attracts penalty and interest. You must also retain your records for five years. Put those dates alongside your CIPC obligations in one place — our company compliance calendar maps the annual return, tax and VAT deadlines onto a single year.

If you registered late, this is what happens

Where a person has not applied for registration and SARS is satisfied that they were liable, that person is deemed to be a vendor from the date liability first arose. The consequence follows from how the VAT Act treats prices: the consideration you received is treated as having included VAT, so the output tax comes out of revenue already banked rather than being added to it. Penalty and interest apply on top. Input tax on your own purchases in that period can be claimed if you hold valid tax invoices — which is the practical argument for keeping supplier invoices properly even before you are registered.

If you discover the problem yourself, do not simply start charging VAT and hope the earlier period goes unnoticed. Speak to a tax practitioner about the disclosure routes available before SARS raises it, because the relief available differs sharply depending on who raises it first.

Getting out: cancelling a registration

Cancellation is done on form VAT123e (or VAT123T for separately registered enterprises), submitted to the SARS branch where you are registered. You keep charging and accounting for VAT right up to the last day of your final tax period, and SARS will not finalise the cancellation while VAT liabilities are outstanding.

The sting is in the final return. You must declare output tax in field 1A on assets on hand at the date you cease to be an enterprise — the vehicles, equipment and stock you claimed input tax on are treated as a deemed supply to yourself. At 15% on a VAT-inclusive value that is the 15/115 fraction of what those assets are worth, payable in cash, on a day you have sold nothing. A business with R400 000 of equipment and stock is looking at roughly R52 000. Budget for it before you file the form.

Common questions

Is the R2.3 million turnover or profit? Turnover — the value of taxable supplies. Your costs are irrelevant to the test. A business with R2.4 million of sales and no profit is still liable.

Do I need a registered company to register for VAT? No. The test is whether you carry on an enterprise, so a sole proprietor can be a vendor. Most owners do incorporate first, and if you are at that stage our step-by-step guide to registering a company online and our business registration service cover that route.

Can a turnover-tax micro business register for VAT? Yes — the two are no longer mutually exclusive, and SARS provides a six-monthly Category D tax period for micro businesses registered under the Sixth Schedule. Whether it is sensible depends on your customers; see our explainer on turnover tax for micro businesses.

What else must a new company register for? VAT is one of several registrations, and it is usually not the first. Income tax, and PAYE, UIF and SDL once you employ anyone, come earlier — we set out the full list in the SARS registrations a new company needs. If your company is small enough to qualify, also read up on small business corporation tax relief, which is a separate regime with its own tests.

Does registering help me get finance? Indirectly. Lenders reading VAT201 history get an independent, hard-to-fudge picture of turnover, which usually helps a working-capital application more than management accounts do. If that is your reason for looking at this, compare what is available through our business loan comparison first — and never register for VAT purely to look bigger.

Sources and disclaimer

Figures in this article are established from primary sources: the South African Revenue Service pages on Value-Added Tax, registering for VAT, tax periods for VAT vendors, obligations of a VAT vendor and cancellation of VAT registration, together with the SARS Budget 2026 frequently asked questions confirming the 1 April 2026 threshold increases, and the Value-Added Tax Act 89 of 1991. Thresholds and rates change — confirm against sars.gov.za before you act on them.

This is general information, not financial, tax or legal advice. VAT liability turns on the specific facts of your enterprise, and the cost of getting the registration date wrong is high. Where the numbers are close to a threshold, or where a written contract may trigger liability early, get advice from a registered tax practitioner.