Value-Added Tax (VAT) is one of the first big compliance milestones a growing South African business hits. Get the timing right and it's a routine registration; get it wrong and you can find yourself liable for VAT you never charged your customers. This guide covers when you have to register, when you might choose to, and what actually changes once you're a VAT vendor.
What is VAT, briefly
VAT is an indirect tax charged on the supply of most goods and services in South Africa, currently at a standard rate of 15%. Registered businesses (called VAT vendors) charge VAT on what they sell — output VAT — and claim back the VAT they pay on business purchases — input VAT. You pay SARS the difference, or claim a refund when your input VAT is greater than your output VAT.
When registration is compulsory
You must register for VAT once your taxable supplies (broadly, your VAT-able turnover) exceed R1 million in any consecutive 12-month period. Importantly, that's a rolling window — not your financial year — so it's worth watching your trailing 12-month turnover as you grow, not just your year-end figure.
You also become liable to register if you've entered into a written contract that will, on its own, take you over R1 million in the following 12 months. In other words, a single large contract can trigger the obligation before your historical turnover would.
When you can register voluntarily
If your taxable supplies have exceeded R50,000 in the past 12 months, you can choose to register voluntarily even though you're under the compulsory threshold. Whether that's worthwhile depends on your situation:
- If your customers are mostly other VAT-registered businesses, charging VAT doesn't cost them anything (they claim it back) and you get to claim your own input VAT — often a net win.
- If your customers are mostly the public or non-VAT businesses, adding 15% can make you less competitive, since they can't claim it back.
- Voluntary registration also means taking on the admin: charging VAT correctly, keeping valid tax invoices, and filing returns on time.
How to register
Most businesses register through SARS eFiling. You'll need your business and banking details, proof of the business address, and documents supporting your turnover (or the contract that triggers the obligation). SARS may ask for additional verification before activating your VAT number, so don't leave it to the last minute if you're approaching the threshold.
What changes once you're registered
From your effective registration date you must charge 15% VAT on your taxable supplies, issue tax invoices that meet SARS's requirements, and file VAT201 returns for each tax period (many smaller vendors file every two months; larger vendors file monthly). Returns and payments are due by the 25th of the month following the tax period — or the last business day of the month when you file and pay through eFiling.
The single biggest practical shift is record-keeping. Every sale needs a compliant tax invoice, and every input VAT claim needs a valid tax invoice to back it up. This is where good accounting software earns its keep — VAT is calculated on each transaction as you capture it, and your VAT201 figures are ready when the return is due, rather than reconstructed from a shoebox of slips.
This guide is general information to help you get oriented — it isn't formal tax or legal advice. Thresholds, rates and deadlines change, so confirm the current figures on the SARS website or with your accountant before you act.