South African small businesses received an important VAT change in 2026. SARS now applies a compulsory VAT registration threshold of R2.3 million in taxable supplies over a 12-month period, up from R1 million. The voluntary registration threshold also increased to R120,000, up from R50,000.
For many SMEs, this change creates more breathing room before compulsory VAT registration becomes necessary. It also means business owners should review turnover, pricing and record-keeping more carefully so that registration does not become a last-minute emergency.
What changed in 2026?
- Compulsory VAT registration: taxable supplies above R2.3 million in any rolling 12-month period.
- Voluntary VAT registration: generally available once qualifying taxable supplies exceed R120,000 in a 12-month period, subject to SARS requirements.
- Effective date: SARS applies the new thresholds from 1 April 2026.
- VAT rate: the standard VAT rate remains 15%.
What counts toward the R2.3 million threshold?
The threshold is based on taxable supplies, not simply profit. That means businesses should track qualifying sales carefully rather than looking only at the amount left after expenses.
SARS also states that compulsory registration can apply where a business expects taxable supplies to exceed the threshold because of a written contractual obligation. This is important for businesses that sign a large contract and know in advance that turnover will move above the threshold.
Why the new threshold matters for SMEs
The higher threshold reduces the number of smaller businesses forced into VAT administration too early. For some companies, this can reduce compliance pressure while the business is still building stable systems.
But it does not mean VAT can be ignored. A business approaching R2.3 million should still prepare early because VAT registration affects invoicing, pricing, bookkeeping, cash flow and the way financial records are maintained.
Should you register voluntarily?
Voluntary registration can make sense for some businesses, especially where customers are mainly VAT-registered companies or where the business incurs significant VAT-bearing expenses. It can also allow a qualifying vendor to claim input VAT on certain business expenses.
However, voluntary registration also creates ongoing responsibilities: VAT invoices must be correct, returns must be submitted on time, records must be maintained and VAT collected from customers must be managed carefully. Registration should therefore be considered in the context of the business model rather than treated as an automatic badge of credibility.
A practical VAT readiness checklist
- Track taxable turnover every month on a rolling 12-month basis.
- Keep bookkeeping and bank reconciliations current.
- Separate taxable, zero-rated and exempt supplies correctly where relevant.
- Review major new contracts that could push turnover above the threshold.
- Check whether your invoicing system can handle VAT correctly.
- Assess the cash-flow impact of collecting and paying VAT.
- Prepare supporting records before a SARS registration or verification request.
What if you were already VAT-registered?
The higher compulsory threshold does not mean existing VAT registrations simply disappear. SARS has specifically indicated that registrations are not automatically cancelled. A business considering deregistration should first understand the consequences and follow the formal SARS process.
Where Aquinas can help
Aquinas Business Consulting can help businesses organise the accounting records and supporting information needed to assess VAT readiness, maintain cleaner bookkeeping and manage agreed SARS administration. Our Accounting & Bookkeeping and Tax & SARS Compliance services can work together where both the records and the tax process need attention.
Official SARS sources
This article is general information and does not replace advice based on your specific tax position.
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