How the R2,300,000 test works
Section 23 of the VAT Act makes registration compulsory in two situations. The first looks back: the value of taxable supplies in any 12 consecutive months has exceeded R2,300,000. The second looks forward: there is a written contract or commitment under which taxable supplies in the next 12 months will exceed it. SARS has applied the R2,300,000 figure to new applications since 1 April 2026, the date announced in Budget 2026.
In practice that means a running total. At each month end, add up taxable supplies for that month and the 11 before it, across every branch and division. An average of R191,667 a month is the point where the rolling 12-month figure passes R2,300,000. If the total goes over in a particular month, you become liable from the first day of the next month.
What counts as taxable supplies
Taxable supplies are everything you sell that is subject to VAT at 15% or at 0%. The amount is measured excluding VAT. Exempt supplies are not taxable supplies, so a business that only lets residential property or only provides financial services never reaches the threshold, however large it is.
| Include | Leave out |
|---|---|
| Sales and fees for goods and services supplied in South Africa | Exempt supplies, such as residential rent and financial services |
| Goods exported, which are zero-rated | Old plant, machinery or other capital assets sold because you are replacing them |
| Services rendered outside South Africa | Stock and assets sold when closing down or permanently shrinking the business |
| Sales from all branches and divisions | Donations received by associations not for gain |
| Deemed supplies | The VAT itself |
Worked example: a Durban exporter
A Durban supplier sold R1,650,000 of goods locally over the past 12 months, exported R720,000 to Mozambique and earned R400,000 in interest on a loan to a related company. Taxable supplies are R1,650,000 + R720,000 = R2,370,000. The interest is exempt and is left out. That is R70,000 over the line, so registration is compulsory even though local sales alone are well below it. Every month of delay means about R17,935 of VAT on local sales that the business will have to pay out of its own margin if SARS backdates the registration.
Monthly sales and where they land
| Average taxable supplies a month | 12-month total | Registration |
|---|---|---|
| R8,000 | R96,000 | Below the voluntary minimum |
| R10,000 | R120,000 | Below the voluntary minimum |
| R50,000 | R600,000 | Voluntary |
| R100,000 | R1,200,000 | Voluntary |
| R150,000 | R1,800,000 | Voluntary |
| R190,000 | R2,280,000 | Voluntary |
| R200,000 | R2,400,000 | Compulsory |
| R250,000 | R3,000,000 | Compulsory |
Registering in time
Apply within 21 business days of the date the threshold is or will be exceeded. Most applications go through eFiling under SARS Registered Details, and where SARS identifies no risk it issues the VAT number immediately. eFiling lets you backdate a compulsory registration by up to six months from the date you crossed the threshold. Anything older needs a SARS branch appointment, with financial statements, contracts or invoices to support the liability date.
Voluntary registration from R120,000
A business below R2,300,000 may register if its taxable supplies in the past 12 months exceeded R120,000, or if it has a written contract for more than that in the next 12 months. Municipalities, welfare organisations, a buyer of a business as a going concern, and businesses in listed activities such as farming, mining, manufacturing and property development can register before reaching the minimum. A voluntary registration starts on the application date and cannot normally be backdated.
Registering early lets you claim input VAT on what you buy, and some VAT-registered customers prefer to deal with vendors because they can claim back the VAT you charge. The cost is a VAT201 return every period and, if most of your customers are consumers, prices that rise by 15% or margins that shrink.
What happens if you do not register
SARS can register you from the date you became liable. Your prices are then treated as if they included VAT, so 15/115 of your standard-rated sales since that date becomes VAT you owe, without the chance to recover it from customers. Late payment of VAT attracts a 10% penalty plus interest, and the Tax Administration Act adds administrative non-compliance penalties for returns not filed. The SARS Voluntary Disclosure Programme is the route to regularise this before SARS finds it.
After you register
SARS allocates a tax period. Most small vendors file every two months, in Category A (periods ending in odd months) or Category B (even months). Vendors whose taxable supplies exceed R30,000,000 in 12 months file monthly in Category C. On eFiling the VAT201 and payment are due by the last business day of the month after the period ends; manual returns are due by the 25th. Use the VAT calculator to add or remove 15% on invoices, and read our guide to VAT registration for the documents SARS asks for.
Frequently asked questions
What is the VAT registration threshold in South Africa?
From 1 April 2026, registration is compulsory once taxable supplies in any 12 consecutive months exceed R2,300,000. Before that date the threshold was R1 million. Budget 2026 also raised the voluntary minimum from R50,000 to R120,000.
Do zero-rated sales count towards the R2.3 million?
Yes. Zero-rated supplies, such as exports and basic foodstuffs, are taxable supplies at 0%, so they count in full. Exempt supplies, such as financial services and residential rent, do not count at all. A business selling R1,650,000 at 15% and exporting R720,000 has R2,370,000 of taxable supplies and must register.
How long do I have to register once I pass the threshold?
21 business days from the date the threshold is or will be exceeded. Liability normally starts on the first day of the month after the month in which your rolling 12-month total crossed R2,300,000.
Is the 12-month period my financial year?
No. SARS looks at any 12 consecutive months, so the test rolls forward every month. Keep a running total at each month end of the last 12 months of taxable supplies across every branch and division of the business.
I have a contract that will take me over R2.3 million. Do I register now?
Yes. If a written contract or commitment means your taxable supplies in the next 12 months will exceed R2,300,000, you are liable from the start of the month in which that 12-month period begins, even if past turnover was low. A forecast without a written commitment does not trigger registration on its own.
What happens if I should have registered but did not?
SARS may backdate your registration to the date you became liable and charge penalties and interest. You then owe VAT on sales made since that date even though you never charged it, because your prices are treated as including VAT. On standard-rated sales that is 15/115 of every rand received. SARS suggests the Voluntary Disclosure Programme for anyone in this position.
I registered under the old R1 million threshold. Can I deregister?
Vendors below the new compulsory threshold may apply to cancel their registration. On cancellation you pay exit VAT on trading stock and assets you claimed input tax on, at the lower of cost and market value. SARS allows that liability to be paid in six equal monthly instalments.