South Africa is entering a new phase of VAT reform with the introduction of updated registration thresholds that take effect on 1 April 2026. These changes are designed to ease compliance for small and growing businesses while refining the rules around VAT deregistration. The adjustments affect both compulsory and voluntary VAT registration and introduce important considerations for vendors evaluating whether to stay registered or exit the VAT system.
Key VAT Threshold Changes:
1. Compulsory Registration: Increased to R2.3 Million
- Old: R1,000,000 → New: R2,300,000
- Fewer SMEs will be forced to register for VAT.
- Businesses earning between R1m and R2.3m may now apply to deregister, but should consider the VAT consequences carefully.
2. Voluntary Registration: Increased to R120,000
- Old: R50,000 → New: R120,000
- Reduces premature voluntary registrations and aligns thresholds with modern economic realities.
Why These Changes Matter:
The goal is to reduce compliance burdens, support SME growth, and better align with international VAT norms. Businesses previously constrained by VAT‑driven “glass ceilings” now have more room to expand without administrative pressure.
Current VAT Registration Challenges:
Many businesses are also experiencing significant delays in obtaining VAT registration approvals, largely due to increased verification requirements and stricter compliance checks by SARS. These include more detailed reviews of supporting documents, validation of trading activity, and closer scrutiny of bank statements and proof of turnover. As a result, applications often take longer to finalise, and vendors may face follow‑up requests or additional audits before approval is granted. Preparing complete, accurate documentation upfront is essential to avoid extended processing times.
Deregistration: Key Considerations:
Deregistering due to the new thresholds may trigger VAT liabilities.
Deemed Supply (Section 8(2))
VAT may become payable on:
- Trading stock
- Fixed assets
- Intangibles
- Creditors less than 12 months old. Calculated at open market value, not book value
Common Challenges:
- Determining fair market value
- Valuation disputes with SARS
- Significant liabilities on assets like property or vehicles
- Mixed-use assets taxed at full value on deregistration
Documents Needed for VAT Deregistration:
SARS requires:
- Up‑to‑date financial statements
- All VAT201 returns submitted
- Proof of cessation or reduced turnover
- Asset lists + valuation records
- SARS correspondence (VAT123 forms, notices, acknowledgements)
As the new VAT thresholds take effect on 1 April 2026, businesses are encouraged to carefully assess how these changes may influence their compliance obligations, cash‑flow planning, and long‑term tax strategy. While many vendors will benefit from reduced administrative pressure, those considering deregistration must understand the potential VAT implications and documentation requirements. Taking a proactive approach through valuation reviews, proper record‑keeping, and professional guidance, will help ensure a smooth transition under the updated VAT framework.
Let our team help you navigate VAT updates and keep your accounting in order. Get in touch with us today.
Warm regards,
C2M
