A new tax Bill proposes a significant change to the VAT registration threshold for South African businesses. The Rates and Monetary Amounts and Amendment of Revenue Laws Bill was introduced in the National Assembly on 21 October 2026 and would increase the compulsory VAT registration threshold from R1 million to R2.3 million in taxable supplies over a 12-month period.

Important: this is a proposal, not an enacted change. SARS explains that Bills must still pass through Parliament and receive presidential assent before they become Acts. Businesses should therefore prepare for the possible change without changing their VAT status solely on the basis of the Bill.

What the proposed VAT change would do

Under the Bill, a business would become liable to register for VAT when its taxable supplies exceed R2.3 million in the relevant 12-month period. The same R2.3 million threshold is proposed for certain enterprises that may currently be required to register when the threshold is exceeded in a consecutive 12-month period.

The Bill also proposes increasing the voluntary VAT registration threshold from R50 000 to R120 000. These amendments are stated in the Bill to have deemed effect from 1 April 2026, but that wording does not remove the need for the legislative process to be completed before businesses can rely on the changes as law.

Which businesses may be affected?

The proposal is most relevant to growing SMEs whose annual taxable turnover is approaching or has recently exceeded R1 million. If enacted, some businesses that would otherwise have been required to register for VAT could remain outside compulsory registration until their taxable supplies exceed R2.3 million.

That does not automatically mean that VAT registration will be disadvantageous or unnecessary. A business may still benefit from voluntary registration where it incurs substantial VAT on business inputs, supplies VAT-registered customers or needs to present itself as an established supplier in a particular market.

What businesses should check now

  • Track taxable supplies on a rolling 12-month basis rather than relying only on annual revenue.
  • Separate taxable supplies from exempt, zero-rated and non-taxable amounts when assessing the threshold.
  • Review whether current pricing, contracts and invoices assume that VAT is being charged.
  • Compare the input VAT recovery benefits of registration with the administration, invoicing and return-filing obligations.
  • Monitor the Bill’s progress and confirm the final effective date before changing a registration decision.

Practical next steps for SMEs

Businesses close to the existing threshold should maintain their current compliance process until the proposal is enacted or otherwise clarified by SARS. Finance teams can use the proposed R2.3 million threshold for scenario planning, but should label forecasts clearly as “proposed” and retain evidence supporting the taxable-supply calculation.

It is also worth checking whether accounting software can report taxable supplies by category and period. Reliable monthly reporting will make it easier to identify when registration may become necessary and to support the calculation if SARS requests information.

For help reviewing VAT processes, reporting or broader SME tax controls, businesses can explore Your Financial Partner’s accounting and tax services.