VAT Registration Threshold South Africa: what changed, and what deregistering costs

From 1 April 2026 the compulsory VAT registration threshold in South Africa rose from R1 million to R2.3 million in taxable supplies over any 12 months, and the voluntary threshold rose from R50 000 to R120 000. Businesses already registered below the new figure are not deregistered automatically. They may apply to cancel, but cancelling triggers output tax on assets still held.

That last sentence is where the money is, and it is the part most coverage of the change leaves out. The threshold moved in your favour. The exit did not.

What actually changed on 1 April 2026?

Two numbers, one date. Both were announced in the February 2026 Budget and both took effect on 1 April 2026.

Threshold	Was	Now	What it does
Compulsory registration	R1 million	R2.3 million	Above this in taxable supplies over any consecutive 12 months, you must register.
Voluntary registration	R50 000	R120 000	Above this, you may choose to register even though you are not required to.

Note what did not change: the VAT rate, the tax periods, the invoice rules, and the machinery that decides when you become liable. Only the two amounts moved.

The compulsory threshold more than doubled, which is the largest single move it has made in years. A business turning over R1.8 million was required to be a VAT vendor in March 2026 and was not required to be one in April.

Does the new threshold deregister you automatically?

No. SARS is explicit that businesses already registered below the new compulsory threshold are not automatically deregistered. In its own Budget 2026 guidance, asked whether existing vendors below the threshold are deregistered, the answer given is: "No. You can, however, choose to cancel your VAT registration."

So nothing happens to you by default. If you were a vendor on 31 March 2026, you are still a vendor today, with every obligation that carries: returns on your tax periods, output tax on your supplies, valid tax invoices, records kept.

Deregistering is an application you make, and it is a decision, not an administrative tidy-up.

What does deregistering actually cost?

This is the part that catches people. When you stop being a vendor, the VAT Act does not simply switch you off. It treats the assets still sitting in your business as though you had sold them to yourself on the way out.

SARS puts it plainly in its own guide for vendors, listing this among the deemed supplies on which output tax is payable at the standard rate:

"assets retained upon ceasing to carry on an enterprise, when a vendor deregisters as a vendor, certain goods or rights forming part of the enterprise's assets are deemed to be supplied in the course of the vendor's enterprise, immediately before the person ceased to be a vendor, irrespective of when those assets may have been acquired, subject to certain exceptions."

The phrase to sit with is irrespective of when those assets may have been acquired. The bakkie you bought six years ago and claimed input tax on is in scope. So is the stock on the shelf, the plant, the equipment, the fittings.

SARS confirms where that lands: output tax on certain assets on hand at the date of ceasing must be declared, together with any other output tax and input tax, in the VAT return for that final tax period. One return. Not spread, not deferred by default.

So the real question is never "am I under the threshold". It is "what is sitting in my business, and what happens when the law treats it as sold".

The second charge almost nobody mentions

There is a further adjustment, and it is easy to walk into.

If you claimed input tax on a supplier invoice you have not yet paid, and you cease to be a vendor within 12 months after the end of the tax period in which you made that deduction, the output tax adjustment that would normally only bite at the 12-month mark must instead be made immediately before you cease to be a vendor. The guide's own footnote points to section 22.

In practice: deregistering accelerates your unpaid-creditor clawback. A business that deregisters while carrying a stretched creditors book can face the exit charge on assets and the creditor adjustment in the same final return.

Why the SARS guide you download still says R1 million

Here is something worth knowing before you go looking for guidance.

The VAT 404 Guide for Vendors is the main SARS publication a small business would reach for. We downloaded the copy currently published on the SARS website on 6 August 2026 and searched it. Issue 15, 176 pages. It refers to the compulsory threshold as R1 million 27 times. It mentions R2.3 million not once. Its cancellation section still reads "less than the compulsory registration threshold of R1 million".

That is not a trap so much as a lag, and it matters in a specific way: the guide is stale on the number and still correct on the machinery. The amounts changed. The sections that decide when you become liable, how the test is applied, and what happens when you leave did not.

So read it for the mechanism and take the figure from the current SARS threshold guidance. Do not do the reverse.

How does SARS actually test the threshold?

The test is not your financial year. It is a rolling one, and the guide sets out the mechanism under section 23:

1. Keep a running total of taxable supplies across all your enterprises for the past 12 months.
2. If that running total exceeds the threshold in any particular month, you become liable to register from the first day of the next month.
3. You must apply for registration within 21 business days of becoming liable.

There is a forward-looking arm too. If you have a written contractual obligation to make taxable supplies exceeding the threshold within a 12-month period, you are liable from the commencement of the first month of that period. Signing the contract can trigger it before a single invoice goes out.

Three consequences follow, and they are the practical ones:

• A year-end report cannot answer this question. Any consecutive 12 months means the window moves every month.
• The clock is short and it starts without telling you. Liability begins on the first of the following month, and the 21 business days run from there, not from when you notice.
• It is turnover, not profit. The threshold applies to the value of taxable supplies, not to what the business made.

So should you deregister?

We are not going to answer that for you, and anyone who answers it without seeing your numbers is guessing. What we can do is name the things the decision actually turns on.

Points toward staying registered: most of your customers are themselves VAT vendors, so the VAT you charge costs them nothing and they simply claim it. You buy significant standard-rated inputs and claim input tax on them. You are growing toward R2.3 million anyway and would be back inside within a year or two. You hold assets on which the exit charge would be substantial.

Points toward deregistering: you sell mainly to consumers or to non-vendors, so your VAT-inclusive price is a real 15% disadvantage against an unregistered competitor. Your inputs are small or largely not standard-rated, so input tax was never worth much. Your asset base is light, so the exit charge is small. The compliance load is genuinely costing you.

The trap in the middle is the business that is under the threshold today and heading back over it. Deregistering, paying the exit charge, then re-registering a year later and starting the asset position again is an expensive round trip.

Run the exit charge before you make the call. If nobody can tell you what your business is holding without a stocktake, that is your answer about something else entirely.

How this work stops being manual

Every rule above is a data question wearing legal clothes, and each one has a mechanical answer.

Derive the running total, do not count it. Section 23 asks for a rolling 12-month figure that changes every month. If every invoice is captured once at issue, with its date and taxable value, that total is a query you can run on any day. If it lives in a spreadsheet that someone re-types monthly, you get one backward-looking answer a month, and the month you are most likely to miss is the one where things went well.

Fire the alert on approach, not on breach. By the time the total has been exceeded, liability has already attached from the first of the next month and the 21 business days are running. The useful trigger is a percentage of the threshold, raised by the invoice event itself, not by a diary reminder someone has to keep re-setting.

Watch the contract, not only the invoice. The forward-looking arm is triggered by a signed written obligation. If contracts are signed in one place and invoices are raised in another, nothing sees both. Capture the contract value at signature, in the same record the invoices later attach to.

Keep the asset register where the purchase is recorded. The exit charge is computed on assets on hand. If assets exist only in a depreciation schedule at the accountant, answering "what would deregistering cost" means a stocktake and a delay. If each purchase is captured once with its VAT treatment, the answer is a report.

Date the input-tax claim against unpaid supplier invoices. The creditor adjustment turns on how long an invoice has been unpaid since the deduction. That is a stored date and a status, so it can be seen coming rather than discovered in a final return.

Let the template enforce the invoice, not a person. If you stay registered, every tax invoice has to carry what the Act requires, on every document, forever. That is a job for the thing that generates the invoice. See our guide to tax invoice requirements in South Africa for what has to be on it.

None of this is exotic. It is the same principle every time: capture once, derive the rest, and let the event raise the alert instead of a person remembering to look.

Where this sits in the rest of your compliance

VAT registration is one thread in a larger set of obligations that switch on at different sizes and dates. Our South African small business compliance checklist arranges them in dependency order, by what triggers each one rather than by which body administers it.

Two neighbours are worth reading alongside this one. The first provisional tax period closes on 31 August 2026, and it is a separate obligation from VAT with its own dates. CIPC annual returns are separate again, and they are not tax returns at all.

If you are weighing what the admin around all of this actually costs you, we looked at that in the real cost of manual admin for South African SMEs, and at the record side in how to track business expenses for SARS. For invoicing itself, start with invoicing for small business. And if you are tendering or contracting, your tax compliance status PIN depends on all of the above being in order.

Frequently Asked Questions

Do I have to deregister if my turnover is now below R2.3 million?

No. SARS does not deregister existing vendors automatically when they fall below the compulsory threshold. You remain a vendor, with all the usual obligations, unless and until you apply to cancel and SARS confirms the cancellation.

What is the voluntary VAT registration threshold in South Africa now?

R120 000 in taxable supplies over 12 months, up from R50 000, effective 1 April 2026. Above that figure you may register voluntarily even though you are below the R2.3 million compulsory threshold, subject to the other voluntary registration requirements.

Will I pay VAT on my assets if I deregister?

Generally yes. Goods and rights forming part of the enterprise's assets are deemed to be supplied immediately before you cease to be a vendor, subject to certain exceptions, and the output tax is declared in your final VAT return. Get the figure calculated before you apply.

Is the R2.3 million threshold based on turnover or profit?

Turnover. The threshold applies to the total value of taxable supplies made in the course of the enterprise over any consecutive 12 months, not to net income. A low-margin business can be well over the threshold while making very little.

How long do I have to register once I cross the threshold?

Liability starts on the first day of the month after the running 12-month total exceeds the threshold, and the application must be made within 21 business days of becoming liable. The forward-looking arm can trigger it earlier, from a signed written contract.

Sources

• South African Revenue Service, "What is the new threshold for VAT registration?", stating the compulsory threshold increase from R1 million to R2.3 million effective 1 April 2026.
• South African Revenue Service, Value-Added Tax landing page, stating both the compulsory increase and the voluntary increase from R50 000 to R120 000, effective 1 April 2026.
• South African Revenue Service, Budget 2026 Frequently Asked Questions, on both thresholds and on existing vendors below the threshold not being automatically deregistered.
• South African Revenue Service, Cancellation of VAT registration, on when a vendor may apply, the effective date of cancellation, and output tax on assets on hand being declared in the final tax period.
• South African Revenue Service, VAT 404 Guide for Vendors, Issue 15, for the deemed supply on deregistration, the section 22 creditor adjustment on ceasing to be a vendor, and the section 23 registration mechanism (running 12-month total, liability from the first day of the next month, 21 business days to apply). Downloaded from the SARS website and searched on 6 August 2026.

This is general information about a change in the VAT registration thresholds, not tax advice. The deregistration decision depends on your asset position, your customer base and your input tax profile. Have the exit charge calculated on your actual numbers before you apply to cancel.

Work out what this costs you before you decide

Most owners weighing this are really asking a bigger question: how much of my week goes to compliance admin that a system should be doing. That is what a business autopsy is for. We map where the time actually goes and what can be captured once instead of re-typed, and you leave with the picture whether or not you work with us. If you would rather just talk it through first, start with a discovery call.