South Africa VAT Rates & Registration

Ever found yourself staring at a VAT registration form, wondering if your business even needs to register? Or maybe you’ve been hit with that dreaded realization that you’ve crossed the registration threshold and have no idea what to do next?

I’ve been there, and so have countless South African business owners I’ve worked with over the past decade.

Value-added tax is one of the most popular forms of government taxes in the world. South Africa VAT is just that, making taxation simpler.

Apart from the several types of corporate and small business taxes that South African businesses have to pay, South Africa VAT is common to all. This commonality includes paying customers as well, as South Africa VAT is paid by the end users.

I have explained this entire South Africa VAT regime in this article. We will discuss what South Africa VAT is, what are its rates, and the step-by-step South Africa VAT registration process.

So let’s get right into it!

 

What Is Value Added Tax or VAT?

 

Value Added Tax (VAT) is a type of consumption tax that’s applied to the value added at each stage of the production and distribution of goods and services.

It’s like a chain reaction of taxes, where businesses collect tax on their sales and get a refund for the tax they paid on their purchases. The difference between the tax collected and the tax paid is what’s owed to the government.

Let me break this down with a simple example:

Imagine a T-shirt manufacturer buys cotton fabric for R100 plus VAT of R15 (at the standard 15% rate). They make a T-shirt and sell it to a retailer for R200 plus VAT of R30. The manufacturer pays SARS the difference between the VAT they collected (R30) and the VAT they paid (R15), which is R15.

The retailer then sells the T-shirt to a customer for R300 plus VAT of R45. They pay SARS the difference between the VAT they collected (R45) and the VAT they paid (R30), which is R15.

 

In total, SARS receives R30 in VAT, which is 15% of the final value added to the product (R200). The end consumer pays the full VAT amount of R45, but businesses along the supply chain only pay VAT on the value they add.

 

This is why it’s called Value-Added Tax – each business in the chain pays tax only on the value they add to the product or service.

 

Current VAT Rate in South Africa

The standard VAT rate in South Africa is currently 15%. 

Important 2025 Update: A proposed increase to 15.5% (from May 1, 2025) and then to 16% (from April 1, 2026) was announced but has been reversed as of late April 2025, following significant public and parliamentary pushback. This means the 15% rate remains in effect for the foreseeable future.

 

 

This reversal has created some transitional compliance challenges for businesses that had already begun adjusting their systems.

If you’re in this situation, I’ll cover the transitional rules later in this post. 

 

Who Should Register For South African VAT?

 

Not every business in South Africa needs to register for VAT. Let’s look at who needs to register and who can register voluntarily. 

 

What Constitutes an “Enterprise” for VAT Purposes? 

Before getting into registration requirements, it’s important to understand what qualifies as an “enterprise” under South African VAT law: 

An enterprise is:

• Any business activity conducted continuously or regularly in South Africa 
• Where goods or services are supplied for consideration (payment) 
• Whether or not for profit 

This includes: 

• Sole proprietors 
• Companies 
• Close corporations 
• Partnerships 
• Trusts 
• Branches of foreign companies operating in South Africa 

Activities that don’t constitute an enterprise include: 

• Services rendered by an employee to an employer 
• Hobbies or occasional private sales not conducted as a business 
• Activities of non-profit associations for their members (in certain circumstances) 
• Private or recreational pursuits not conducted as a business 

Compulsory VAT Registration 

You must register for VAT if your business (enterprise) meets either of these criteria: 

1. The total value of taxable supplies (sales) exceeded R1 million in the past 12-month period. 
2. You have signed contracts that will push your taxable supplies over R1 million in the next 12 months. 

When the threshold is reached, you must register within 21 business days. 

I’ve seen many small business owners get caught off guard when they suddenly cross this threshold, which is why it’s crucial to monitor your turnover closely as you approach R1 million. 

Voluntary VAT Registration 

You can choose to register voluntarily if: 

1. Your taxable supplies exceed R50,000 (or R120,000 for some foreign entities) in the past 12-month period. 
2. The average monthly value of taxable supplies has exceeded R4,200 for the past months. 
3. You have signed contracts that confirm you will exceed R50,000 in taxable supplies. 
4. You have incurred capital expenditure exceeding R50,000. 
5. You’ve entered into financial leases or rental agreements exceeding R50,000.

 

 

Voluntary registration makes sense for many businesses, even if they’re below the compulsory threshold.

Why?

Because it allows you to claim back VAT paid on business expenses and inputs, which can significantly improve your cash flow. 

Plus, I’ve found that being VAT-registered often enhances your business credibility with larger clients who prefer to deal with VAT vendors.

 

Specific Cases for Voluntary Registration 

Some specific cases where SARS allows voluntary registration include: 

1. Welfare organizations whose activities qualify under Section 11(1)(n). 
2. Foreign donors who fund projects in South Africa as specified in international agreements. 
3. Municipal entities that carry out taxable activities. 
4. Developers of a property purchased from the developer by a municipality (specific VAT arrangements apply here).
5. Taxi operators who are members of approved associations, even if they don’t meet the turnover threshold. 

 

So summing this up, in the South African VAT system, an “enterprise” includes activities or supplies by specific individuals or entities, as follows:

 

• Public authorities, as designated by the Commissioner.
• Welfare organizations.
• Share block companies, provided certain conditions are met.
• Implementing agencies are involved in foreign donor-funded projects.
• Intermediaries and non-resident providers of electronic services.

 

Conversely, there are situations where you are not considered to be engaged in an “enterprise.” These include:

 

• Engaging in exempt supplies, such as financial services, residential accommodation, or public transport. For detailed information, consult the VAT 404 Guide for Vendors.
• They are earning a salary or wage as an employee, except for independent contractors. Note that non-executive directors of companies fall into the independent contractor category.
• Pursuing hobbies or personal recreational activities that aren’t conducted as businesses.
• Handling private occasional transactions, like selling personal household items, personal effects, or a private car.
• Offering “commercial accommodation” when the total value of such supplies doesn’t exceed R120,000 over any consecutive 12-month period.

It’s mandatory to register for VAT when the value of taxable supplies made or expected to be made exceeds R1 million in a consecutive 12-month period. Voluntary registration is also a possibility in specific cases.

 

South Africa VAT: Compulsory vs Voluntary Registration

If you’re running a business in South Africa, either entirely or partly, and providing goods or services in exchange for payment, you can sign up for VAT.

There are two scenarios where registering for VAT is a must:

1. When the total value of the things you sell that are subject to VAT reaches or is expected to reach more than R1 million in any 12 months.
2. If you have a written contract that says you’ll be making taxable sales exceeding R1 million in 12 months, you must register for VAT.

 

 

Now let’s check out the details for a compulsory and voluntary South Africa VAT registration.

 

Compulsory Registration For South Africa VAT

If your taxable sales reach or are expected to reach R1 million, you need to apply for VAT registration within 21 business days from that point.

Non-resident suppliers of specific electronic services also have to register for VAT once their total taxable supplies cross the R1 million mark, typically at the end of the month.

Additionally, an intermediary can handle VAT registration and reporting for supplies made by non-resident electronic service providers.

You can find more information in the VAT-Reg-02-G02 Guide on Foreign Suppliers of Electronic Services and the South Africa VAT Frequently Asked Questions for Electronic Service Supplies.

 

Voluntary Registration For South Africa VAT

A person can also choose to register for VAT voluntarily, even if the total value of their taxable supplies is less than R1 million, but has, in some situations, exceeded R50,000 in the past 12 months.

You can apply for voluntary registration in the following cases, even if you haven’t reached the minimum threshold of R50,000 yet:

1. Municipalities
2. Welfare organizations
3. When you acquire an existing business as a going concern
4. If you meet the requirements and conditions outlined in General Notice R447, as published in Government Gazette No. 38836 dated 29 May 2015 (known as the Voluntary Registration Regulation)
5. When your business engages in specific types of activities mentioned in General Notice R446, as published in Government Gazette No. 38836 dated 29 May 2015 (referred to as the Nature of Activity Regulation).

The Nature of Activity Regulation includes a variety of activities. These activities cover a broad spectrum, such as Agriculture, Farming, Forestry, and Fisheries, which entail work related to farming, forestry, and fishing.

 

Requirements under the Voluntary Registration Regulation for South Africa VAT:

1. If you’ve been engaged in taxable supplies for just one month before applying, ensure the value for that month exceeds R4,200.
2. If you’ve been making taxable supplies for two months or more leading up to your application:
   – The average value for those months should have exceeded R4,200 per month.
   – Calculate this average using at least 2 months and up to 11 months before your application date.
3. If you have written contracts and expect taxable supplies exceeding R50,000 in the 12 months following registration.
4. When you have expenses related to starting or continuing a business, or you’ve acquired capital goods for your enterprise. Payment or extended payment agreements should meet the following criteria:
   a) At the time of registration application, the payment has exceeded R50,000.
   b) In any consecutive 12-month period commencing before and ending after the registration application date, payment will exceed R50,000.
   c) In the 12 months following registration application, payment will exceed R50,000.
5. If you have a financial agreement with:
   – A registered bank.
   – A credit provider as per the National Credit Act.
   – A designated entity, public authority, or another party that continuously or regularly provides finance.
   – The total repayment in the 12 months following your registration application must exceed R50,000.

 

In addition, other general requirements for voluntary VAT registration must also be met. Refer to the VAT 404 Guide for Vendors for more details.

 

South Africa VAT Rates

South Africa has two main VAT rates: standard rate and zero rate. There are also exempt supplies that don’t attract VAT at all. Let’s break these down: 

Standard Rate (15%) 

Most goods and services supplied in South Africa fall under the standard rate of 15%. This includes: 

• Retail products 
• Professional services 
• Manufacturing 
• Construction 
• Telecommunications 
• Most imported goods and services 

Zero-Rated Supplies (0%) 

Zero-rated supplies are still taxable but at a rate of 0%.

This means no VAT is charged on the sale, but the vendor can still claim input VAT on related expenses. Zero-rated supplies include: 

• Exports of goods from South Africa 
• International transport of passengers or goods 
• Certain basic food items (brown bread, maize meal, rice, dried beans, fresh fruits and vegetables, eggs, milk) 
• Illuminating paraffin is used for heating or cooking 
• Certain agricultural inputs 
• Fuel levy goods (petrol, diesel) 
• Services to non-residents (under specific conditions) 

Exempt Supplies 

Exempt supplies fall outside the VAT system entirely. No VAT is charged, and no input VAT can be claimed on related expenses. Exempt supplies include: 

• Financial services (e.g., interest on loans, life insurance) 
• Educational services provided by approved institutions 
• Residential rental accommodation 
• Public transport (domestic passenger transport) 
• Childcare services in crèches or after-school care centers 
• Certain non-profit activities 
• Certain government grants 

It’s vital to correctly classify your supplies, as misclassification can lead to underpayment or overpayment of VAT, both of which can cause problems with SARS.

 

South Africa VAT Rates

Rate	VAT Type	Goods & Services Type
0%	Exemption	Export,; agricultural supplies, residential lettings, road and rail transport, financial services, money lending, retirement and medical benefits, international transport.
15%	Standard	All other goods and services

 

 

The Step by Step VAT Registration Process

Getting registered for VAT might seem daunting, but I’ll break it down into manageable steps based on my experience helping businesses navigate this process.

 

 

Step 1: Gather Required Documentation 

Before you begin, make sure you have: 

• Certified ID copies of the business owner/s, partners, directors, or trustees 
• Company registration documents (if applicable) 
• Bank statements for the past 3 months 
• Business financial information (income, expenses, assets) 
• Proof of business address 
• Recent financial statements or management accounts 
• If you’re a foreign business, you may need additional documentation 

Step 2: Register on SARS eFiling 

If you don’t already have a SARS eFiling profile, you’ll need to: 

1. Go to www.sarsefiling.co.za 
2. Click on “Register.” 
3. Follow the prompts to create your profile 
4. Activate your account via the email SARS sends you 

Step 3: Complete the VAT Registration Application 

Once registered on eFiling: 

1. Log in to your eFiling account 
2. Click on “Organization Tax Type.” 
3. Select “Register” next to VAT 
4. Complete the VAT101 form with your business details 
5. Upload all required supporting documents 
6. Submit your application 

I recommend double-checking all information before submission, as errors can significantly delay the process. 

Step 4: Schedule a Virtual Appointment (If Required) 

SARS has implemented a verification process that often requires a virtual appointment: 

1. After submitting your application, SARS may request a virtual meeting 
2. You’ll receive instructions via email on how to schedule this 
3. Prepare for questions about your business operations and financials 
4. Have all original documents available during the meeting 

These virtual appointments can be a bit nerve-wracking, but they’re usually straightforward if your documentation is in order. I’ve found that being organized and prepared makes a huge difference. 

Step 5: Receive Your VAT Registration Number 

If your application is successful: 

1. SARS will issue a VAT registration certificate 
2. You’ll be assigned a unique 10-digit VAT number (starting with 4) 
3. Your certificate will specify your tax period (monthly, bi-monthly, etc.) 

This typically takes 21 business days, but in practice, I’ve seen it take anywhere from 2 weeks to 2 months, depending on SARS’s workload and whether additional information is requested. 

Common Pitfalls to Avoid During Registration

Based on my experience and feedback from many business owners: 

• Inconsistent information: Ensure all details match across your documentation 
• Incomplete documentation: Missing documents will delay your application 
• Unclear business description: Be specific about what your business does 
• Insufficient proof of trading: SARS wants evidence that you’re operating a business 
• Using third-party services charging fees: Remember that VAT registration through SARS is free

 

Filing VAT Returns

Once you’re registered for VAT, you’ll need to file regular VAT returns. Here’s how the process works:

 

VAT Return Periods

Your filing frequency depends on your annual turnover: 

• Monthly: For businesses with turnover exceeding R30 million 
• Every 2 months: For businesses with turnover between R1.5 million and R30 million 
• Every 4 months: For small businesses with a turnover below R1.5 million 
• Every 6 or 12 months: For special cases like farming enterprises or small vendors, on application

 

Tips for Efficient VAT Management 

• Keep detailed records of all transactions 
• Regularly reconcile your accounting system with your bank statements 
• Set calendar reminders for VAT submission deadlines 
• Consider setting aside VAT collected in a separate account to ensure funds are available when payment is due 
• Use accounting software with automated VAT calculations (more on this later) 

 

What Are The Exemptions In South African VAT?

The standard VAT rate is 15 percent, while the reduced VAT rate is 0 percent.

Exemptions from VAT encompass the following supplies of goods or services:

• Certain financial services (note: financial services supplied for a fee, commission, or a similar charge are subject to VAT at the standard rate).
• Educational services are offered by recognized tax-exempt educational institutions.
• Residential rentals and accommodation are provided by employers to their employees.
• Passenger transport within South Africa by road or rail, unless the transport qualifies for zero rating.
• Certain supplies are made by trade unions.
• Donated goods or services sold by non-profit organizations (e.g., religious and welfare organizations).

 

 

Presently, the VAT Act does not specify “place of supply” rules.

Services procured by a vendor from foreign service providers are categorized as imported services, on which VAT may be applicable. For a service to be considered a taxable imported service, it must be:

• Supplied by a non-resident provider.
• Utilized or consumed within South Africa.
• Acquired for purposes other than making taxable supplies.

 

In alignment with the destination-based principles of the VAT Act, services provided to non-residents may be eligible for a 0 percent VAT rate.

However, this rate cannot be applied if the non-resident or any other recipient of the services is present in South Africa during the service provision.

 

Import VAT is payable when tangible goods are imported into South Africa by the importer.

The importer can claim this import VAT as a deduction if they are registered for VAT and acquire the goods to make taxable supplies.

It’s important to note that the importer must also be the owner of the imported goods, as required by the local tax authority (SARS).

In cases where the importer is a non-resident and not VAT registered, they cannot claim the import VAT, which may result in an additional cost for the purchaser.

 

How To Register For South Africa VAT?

If you want to get your VAT Registration sorted, you’ve got a couple of options:

1. Use eFiling
2. Book a virtual appointment through SARS’ eBooking system.
3. Choose either a phone call or a video chat. When you’re setting it up, select ‘Other’ for the reason category and ‘VAT registration’ as the reason for the appointment.

Don’t forget to make sure you attach all the right documents with your VAT registration application. If you miss something, it’ll slow things down. You can submit the necessary papers through eFiling, the SARS website online query system, or, if you prefer, face-to-face, by walking in (but book an appointment first).

 

 

Need more info? Check out the VAT-Reg-02-G01-Guide for Completion of the VAT Application.

Good news – if everything looks good and there are no red flags, you’ll get your new VAT registration number right away!

 

VAT Invoicing Requirements

Proper invoicing is crucial for VAT compliance. Here’s what you need to know: 

Tax Invoice Essentials 

For any sale over R50, a tax invoice is mandatory and must be clearly labeled “tax invoice.” Required details include: 

• Value of goods/services excluding VAT 
• VAT amount (currently 15%) 
• Total value including VAT
• Supplier’s name, address, and VAT registration number 
• For invoices over R5,000: Customer’s name, address, and VAT registration number 
• A full and proper description of the goods/services 
• VAT must be stated in ZAR

 

 

All prices advertised or charged by vendors must be VAT-inclusive, even if not explicitly stated on the invoice.

 

Expert Insights: The Good and Bad of South Africa’s VAT System 

I’ve gathered insights from leading South African VAT experts and business users to give you a balanced view of the system’s strengths and challenges: 

What’s Working Well 

• Digitalization: “Digitalisation is no longer just about convenience – it’s about survival in a data-driven world. Companies that fail to automate financial processes, including VAT compliance, are exposing themselves to unnecessary risk, inefficiencies, and lost cashflow opportunities.” – Alan Sutton, CEO of VATSolv.e 

• Software Solutions: Many users report that good VAT software provides “very economical solutions for small business accounting” with “ease of use and configuration,” allowing them to “send invoices in minutes.” 

Common Challenges 

• Small Business Struggles: Tax practitioners highlight that small business owners “struggle with compliance challenges,” often lack understanding of VAT agency principles, and find invoice-based VAT accounting difficult. 

• Registration Process: The process is “frustrating,” with increased administrative load and longer processing times. Online VAT registration now requires a virtual meeting with SARS and more thorough scrutiny of documents, which many businesses find intimidating and time-consuming. 

• System Issues: Some users of VAT automation software report “completely incompetent support,” poor communication, and delays, noting: “Every day I get a different reason from a different staff person with an excuse for not filing my VAT.” 

How ProfitBooks Helps with VAT Compliance 

Managing VAT manually can be time-consuming and error-prone. That’s why we built ProfitBooks with robust VAT functionality designed specifically for South African businesses.

 

 

With ProfitBooks, you can: 

• Automatically calculate VAT on invoices and expenses 
• Generate VAT-compliant invoices in seconds 
• Track input and output VAT 
• Create VAT reports ready for SARS submission 
• Maintain proper VAT records for the required 5-year period 
• Handle different VAT treatments (standard rate, zero-rated, exempt) 

I’ve seen businesses cut their VAT compliance time by up to 75% using our software. One customer told me they used to spend an entire day preparing VAT returns, but now it takes them less than an hour. 

Want to simplify your VAT compliance? Try ProfitBooks free for 14 days with no credit card required. 

Frequently Asked Questions

 

1. What is the current VAT rate in South Africa?

The standard VAT rate is 15%. Planned increases to 15.5% and 16% have been reversed, so 15% remains in effect.

 

2. Who must register for VAT in South Africa?

Any business with taxable supplies exceeding R1 million in any 12 months must register. Voluntary registration is possible above R50,000 (sometimes R120,000 for foreign entities).

 

3. How do I register for VAT in South Africa?

Register online via the SARS eFiling portal. You’ll need your business details, tax reference number, and supporting documents. Registration is free via SARS; beware of third-party sites charging fees.

 

4. What is a VAT registration number, and how is it used?

It’s a unique 10-digit number (starting with 4) assigned by SARS to registered vendors. It must be shown on all tax invoices over R5,000 and is used for all VAT reporting and compliance.

 

5. What goods and services are zero-rated or exempt from VAT?

Zero-rated: Exports, certain basic foodstuffs, and some agricultural products. 

Exempt: Educational services, residential rentals, non-fee financial services, and some government grants.

 

6. How often must VAT returns be filed?

Filing frequency depends on turnover: 

• Monthly: Turnover > R30 million. 
• Every 2 months: R1.5 million – R30 million. 
• Every 4 months: < R1.5 million. 
• Every 6 or 12 months: Special cases (e.g., farming, small vendors).

 

7. What are the penalties for late VAT payment or non-compliance?

A 10% penalty on the outstanding amount, plus interest. Non-compliance can also lead to audits and further sanctions.

 

8. Can foreigners claim VAT refunds on purchases in South Africa?

Yes, if the value exceeds R250 and goods are exported within 90 days. Refunds are processed at designated airports and border posts.

 

9. Do digital and foreign businesses need to register for VAT?

Yes, if supplying digital services to South African consumers and exceeding the threshold, foreign businesses must register and comply with local VAT rules. However, the new 2025 rules exempt B2B-only providers.

 

10. Is VAT registration free?

Yes, registration with SARS is free. Beware of third-party sites charging fees. Company registration (CIPC) is separate and may have a nominal fee. 

Conclusion

We hope you’ve learned all you needed to know about the South Africa VAT regime. We covered everything related to the subject that is pertinent to business owners in South Africa to comply with South Africa VAT.

We’ve discussed what South Africa’s VAT is, and all business-related technical and legal information on it, and most importantly, we’ve laid down the step-by-step procedure to file your South Africa VAT online.

We’d always recommend referring to the official SARS website for more accurate information and to keep yourself updated with the latest updates in South African VAT.

 

Have questions about South Africa VAT or need help streamlining your financial processes? Feel free to reach out to our team or check out our other resources on small business taxes in South Africa and how to calculate VAT. 

 

Similarly, we also recommend using robust accounting software to manage and track your South African VAT or any other taxes that you need to be compliant with.

The best example of such a system would be ProfitBooks.

 

 

With ProfitBooks, you can manage your taxes and seamlessly track all your expenditures, income, invoices, and much more with perfect bank reconciliation.

The best part?

It is 100% FREE to use!

Get your FREE account now!

 

 

Also Read:

How To Calculate VAT in South Africa?

Small Business Taxes In South Africa

Sole Proprietorship Registration Process In South Africa

Black Tax in South Africa: What It Is & How It Works

The 5 Business Structures In South Africa Explained