Most owners think VAT is a single line in the sand at R2.3 million. The threshold matters — but it isn't the whole story. When you should register depends as much on who your customers are as on your turnover.
The compulsory line: R2.3 million
You must register for VAT once your taxable turnover exceeds R2.3 million in any consecutive 12-month period — or once you've signed a contract that will clearly take you over R2.3 million in the next 12 months. (The 2026 Budget raised this from R1 million, effective 1 April 2026.) After you cross it, you have 21 business days to register. This part isn't a choice.
The voluntary line: R120,000
You may choose to register once your taxable turnover has passed R120,000 in the past 12 months (raised from R50,000 in the same Budget). Plenty of small businesses register voluntarily well before they're forced to — but only when it actually helps them, which brings us to the real question.
The question that really decides it: who are your customers?
VAT is charged at 15%. What matters is who pays it:
- If you mostly sell to other VAT-registered businesses, charging 15% costs them nothing — they claim it back — and you get to claim input VAT on your own purchases. Registering is often a net win.
- If you mostly sell to consumers or non-registered customers, adding 15% either makes you 15% more expensive or quietly eats 15% of your margin. That's the real trade-off most owners miss.
The cashflow cost of getting it wrong
The VAT you charge isn't your money — you're collecting it on behalf of SARS and paying it over (usually every two months on a VAT201). If it sits in your account and gets spent, the next return will hurt. Registration also adds admin: proper tax invoices, records, and bi-monthly returns.
When voluntary registration is worth it
- Your customers are mostly VAT-registered businesses who reclaim the VAT anyway.
- You have meaningful input VAT to claim — for example, large equipment or stock purchases.
- Being VAT-registered signals scale to the clients you're trying to win.
When to wait
If you sell mainly to consumers, your margins are thin, and you're comfortably under R2.3 million, registering early can simply make you more expensive and add admin for little benefit. There's no prize for registering before you have to.
This is general guidance for South African small businesses, not tax advice — thresholds, rates and rules can change, and your situation may differ. Check the current rules on SARS eFiling, or talk to us before you act.