If you’re running a small business in South Africa, you’ve probably heard about VAT, but maybe you’re not sure when it actually applies to you. VAT, or Value-Added Tax, is something that many small businesses ignore for as long as possible. But understanding when to register is important—not just for compliance, but for managing your pricing, cash flow, and tax planning.
In South Africa, the rule is quite simple on paper: if your business (even if you are a sole proprietor) earns more than R1 million in total taxable turnover in any consecutive 12-month period, you are legally required to register for VAT with SARS. This is what’s known as compulsory VAT registration. If you pass that threshold and don’t register, you could face penalties and interest, and SARS can force you to register retroactively: meaning you’d owe VAT on past sales even if you didn’t charge it.
But there’s also the option of voluntary VAT registration. If your business is earning more than R50,000 over the past 12 months, you can choose to register early. This can be helpful in a few scenarios: for example, if most of your customers are VAT-registered businesses (who can claim back the VAT you charge), or if you have large expenses and want to reclaim the VAT you’ve paid on those costs.
It’s important to remember that once you’re VAT-registered, you’ll need to charge 15% VAT on most of your sales, submit regular VAT201 returns (usually every two months), and keep proper tax invoices and records. You can also claim input VAT on your qualifying business expenses, which can reduce your net VAT payment to SARS.
Certain industries and sales types are exempt or zero-rated, so it's worth checking what applies to your specific situation. For example, residential rental income is VAT-exempt, while basic foodstuffs and exports are zero-rated. But most ordinary sales of goods and services are subject to VAT.
So, when should you register? If your revenue is approaching the R1 million mark, or you’ve already crossed it, you need to register as soon as possible. If you’re below the threshold but you think being VAT-registered could benefit your business (such as improving your credibility or allowing you to reclaim input VAT), then voluntary registration may be worth considering.
As always, if you’re unsure, it’s a good idea to chat to a tax advisor or accountant to help you make the right decision. But don’t bury your head in the sand: VAT registration is one of those things that’s far easier to manage if you get on top of it early.