South Africa’s Budget more than doubles VAT registration threshold to R2.3 million
South Africa has more than doubled its compulsory VAT registration threshold, from R1 million to R2.3 million, taking thousands of smaller businesses out of mandatory VAT registration.
The new threshold applies from 1 April 2026 and represents the first increase since 2009. The drivers behind such a large hike are inflation and wanting to lift the smallest businesses out of the forthcoming South African e-invoicing mandate.
Inflation finally catches up with the VAT threshold
The R1 million compulsory registration threshold had been frozen since 2009.
Over 17 years, inflation steadily reduced its real value, pulling increasingly small businesses into the VAT system. Raising the threshold to R2.3 million largely reverses that effect and reduces the compliance burden on smaller traders.
Existing VAT registrations do not simply disappear
Businesses already VAT registered but now below the R2.3 million threshold will need to consider whether deregistration makes commercial sense.
Cancellation can have VAT consequences, including output VAT becoming due on certain assets held when registration ends.
Some businesses may also prefer to remain voluntarily registered. This can be attractive where customers are predominantly VAT-registered businesses and where the supplier incurs substantial recoverable input VAT.
A welcome simplification before further VAT digitalisation
The change comes as South Africa is considering a much broader modernisation of VAT administration, including greater use of transaction data and digital reporting.
There is some logic to the sequencing: remove the smallest businesses from compulsory VAT compliance before making the VAT system more digital and data intensive.
