Should I Register for VAT in South Africa? A Guide for Small Businesses

You must register for VAT in South Africa once your taxable turnover exceeds R1 million in any 12-month period. Voluntary registration is permitted once turnover exceeds R50,000 per year. Whether to register voluntarily before the R1 million threshold is a decision that depends on your client base, your expenses, and whether VAT registration helps or hurts your pricing competitiveness.

This is not tax advice. Always consult a registered tax practitioner before making VAT decisions for your business.

When is VAT registration mandatory?

You are required to register as a VAT vendor with SARS when your taxable supplies exceed R1 million in any rolling 12-month period. Taxable supplies include most goods and services you provide in the course of your business.

You must register within 21 business days of crossing this threshold. Late registration results in SARS treating you as a VAT vendor from the date you should have registered, meaning you may owe back-VAT on invoices you already issued.

SARS also allows compulsory registration if you have a written contract confirming that taxable supplies will exceed R1 million in the next 12 months, even if you have not yet reached that level.

When is VAT registration voluntary?

You may choose to register for VAT if your taxable turnover exceeds R50,000 in any 12-month period. Below R50,000, SARS will not accept a voluntary registration application.

Voluntary registration makes sense in certain situations, but it is not the right choice for every small business.

Pros and cons of voluntary VAT registration

Reasons to register voluntarily:

• Claim back input VAT on expenses. If you spend significantly on VAT-inclusive expenses (equipment, software, rent, professional services), you can claim back the VAT component. At 15%, this can be meaningful for capital-intensive businesses.
• Look more established to corporate clients. Many large companies and government entities prefer to work with VAT-registered suppliers. A VAT number on your invoice signals a level of business formality.
• Enable faster voluntary deregistration later. Once registered, you can only deregister if your turnover drops below R1 million.

Reasons not to register voluntarily:

• Your prices effectively increase by 15%. If your clients are not VAT registered (such as consumers or very small businesses), they cannot claim back the VAT you charge. Your prices become 15% more expensive overnight.
• Administrative overhead. VAT-registered businesses must submit VAT201 returns every 2 months and maintain proper records of all taxable supplies and input tax claims.
• Cash flow risk. You must pay over the VAT you collect to SARS by the 25th of the month following the tax period, whether or not your clients have paid you yet.

What changes when you register for VAT?

Once registered, you must:

1. Charge 15% VAT on all taxable supplies in South Africa
2. Issue tax invoices (not standard invoices) for all sales
3. Submit VAT201 returns every 2 months (or monthly if SARS requires it based on your turnover)
4. Pay net VAT to SARS by the 25th of the month after each tax period
5. Keep records of all tax invoices issued and received for at least 5 years
6. Display your VAT registration number on all tax invoices

Your invoicing software (like Rebill) needs to support VAT calculations. Rebill automatically calculates 15% VAT, shows it separately on the invoice, and includes your VAT number on all tax invoices.

How to register for VAT with SARS

1. Check eligibility. Your turnover must be above R50,000 per year (or you have a written contract confirming R1 million within the next 12 months, or you have exceeded R1 million in the past 12 months).
2. Register on eFiling. Go to www.sars.gov.za and log in to eFiling. Select “Register” under the VAT section.
3. Complete the VAT101 form. This is the VAT registration application. You will need your business details, bank account information, and an estimate of your monthly taxable turnover.
4. SARS processes the application. Registration typically takes 3 to 5 business days. SARS may request supporting documents.
5. Receive your VAT registration number. This is a 10-digit number starting with 4. Add it to your invoicing software and all future invoices.