The VAT Registration Threshold
Value Added Tax (VAT) in South Africa is governed by the Value-Added Tax Act 89 of 1991. The standard rate is 15%, applicable to most goods and services.
A business must register for VAT when its taxable supplies exceed — or are reasonably expected to exceed — R1,000,000 in any consecutive 12-month period. This is the compulsory registration threshold.
A business may voluntarily register for VAT if its taxable supplies exceed R50,000 in the preceding 12 months. Voluntary registration is often advantageous for B2B businesses that can claim input tax credits.
What Are Taxable Supplies?
Not all revenue counts toward the VAT threshold. Taxable supplies include:
- Standard-rated supplies (15% VAT)
- Zero-rated supplies (0% VAT — exports, basic foodstuffs, international transport)
- Residential rental income
- Financial services (interest, insurance premiums)
- Educational services by approved institutions
The Consequences of Late Registration
If your business exceeds R1 million in taxable supplies and you fail to register for VAT, SARS will:
- Backdate the registration to the date the threshold was first exceeded
- Assess VAT on all supplies made since that date — at 15% of the VAT-inclusive price (i.e., 15/115 of your revenue)
- Impose a 10% penalty on the outstanding VAT
- Charge interest at the prescribed rate from the date the VAT was due
This retrospective assessment can be financially devastating. If your business has been operating for 18 months above the threshold without registering, SARS will assess VAT on 18 months of revenue — potentially hundreds of thousands of rands.
How to Register for VAT
VAT registration is done through SARS eFiling:
- Log in to eFiling and select "Register New" under "Tax Types"
- Select "Value Added Tax (VAT)"
- Complete the VAT101 application form
- Upload supporting documents: proof of business address, bank confirmation letter, and business registration documents
- SARS will issue a VAT registration number within 5–21 business days
The VAT Return Cycle
Once registered, you must submit VAT201 returns on a monthly or bi-monthly basis (SARS assigns your category based on your turnover). The return is due on the last business day of the month following the end of the tax period.
| Turnover | Return Frequency |
|---|---|
| > R30 million/year | Monthly |
| R1m – R30m/year | Bi-monthly (Category B) |
| < R1m (voluntary) | Bi-monthly (Category A) |
Input Tax: The Benefit of VAT Registration
The major benefit of VAT registration is the ability to claim input tax — the VAT you paid on business purchases. If you purchase equipment for R115,000 (including 15% VAT), you can claim R15,000 as an input tax credit against your VAT liability.
For businesses that make significant capital purchases or buy from other VAT vendors, this can substantially reduce the net VAT cost.
Common VAT Compliance Errors
- Claiming input tax without a valid tax invoice — SARS requires a tax invoice with specific information (VAT number, date, description, amount)
- Claiming input tax on exempt supplies — input tax can only be claimed against taxable supplies
- Incorrect treatment of mixed supplies — if your business makes both taxable and exempt supplies, input tax must be apportioned
- Late submission of VAT201 — penalties of 10% plus interest apply immediately
Should You Register Voluntarily?
Voluntary registration makes sense if:
- Your customers are VAT-registered businesses (they can claim back the VAT you charge)
- You make significant purchases from VAT vendors (input tax credits reduce your cost)
- You want to appear more established to larger clients
It does not make sense if:
- Your customers are primarily end consumers who cannot claim input tax
- Your business margins are thin and adding 15% to your prices would make you uncompetitive
Sources: VAT Act 89 of 1991 | SARS VAT Guide for Vendors
