When Must a Company Register for VAT in South Africa?

Introduction

Value-Added Tax (VAT) plays an essential role in South Africa’s tax system. Because many small businesses are unsure about when VAT becomes compulsory, SARS sets clear rules that determine when a company must register. Understanding these rules helps you avoid penalties and stay compliant.

When VAT Registration Becomes Compulsory

A company must register for VAT when its taxable turnover exceeds R1 million in any 12-month period. This is not based on the calendar year; instead, SARS uses a rolling 12-month calculation.

To clarify, the R1 million threshold applies to:

• Sales of goods

• Services rendered

• Management fees

• Rental income

• Commission

• Any business activity subject to VAT

Because SARS monitors business activity, exceeding the threshold without registering can result in penalties and interest.

How to Know if You Are Close to the Threshold

You must check whether your sales have reached R83 334 per month on average. If you do, you are likely to exceed R1 million for the year.

To summarise:

• More than R83 334 per month → Expect to register

• Sudden growth → Review your turnover

• New contracts → Check if they will push you over R1 million

Therefore, keeping accurate accounting records is essential.

Voluntary VAT Registration (Below R1 Million)

A company may register for VAT voluntarily if its turnover exceeds R50 000 in the past 12 months. Many businesses choose early registration because:

• They want to claim VAT on expenses

• Their clients are VAT vendors

• They want to appear more credible and compliant

• They expect rapid growth

Although voluntary registration has benefits, it also requires monthly or bi-monthly VAT returns, so businesses must ensure they can keep up.

Who Needs to Register for VAT?

VAT registration applies to:

• Private companies (Pty) Ltd

• Sole proprietors

• Close corporations

• Partnerships

• Trusts conducting business

If you run a business that generates taxable supplies, VAT rules apply regardless of your business structure.

When VAT Must Be Registered: Practical Examples

Example 1:
A cleaning company earns R95 000 per month for six months due to a new contract.

• R95 000 × 12 = R1 140 000

• VAT registration is compulsory.

Example 2:
A startup earns R60 000 per month.

• R60 000 × 12 = R720 000

• VAT registration is not compulsory, but voluntary registration is allowed.

Example 3:
A company suddenly signs a once-off R800 000 contract.

• If total turnover is expected to exceed R1 million in the next 12 months → Must register.

What Happens If You Don’t Register?

Failing to register for VAT when required can result in:

• SARS penalties

• Interest charged back to the date you should have registered

• Liability for VAT that was never charged

• Tax compliance status being blocked

• Issues with bank loans or tenders

Because these penalties accumulate quickly, prompt registration is essential.

How to Register for VAT

VAT registration is completed using:

• VAT101 application through SARS eFiling, or

• A branch visit (in limited cases)

You will need:

• Company registration documents

• Proof of business address

• Bank confirmation letter

• Identity documents of directors or owners

• Latest financial statements or bank statements

Once approved, SARS issues your VAT number and sets your filing cycle.

VAT Filing Obligations After Registration

After VAT registration, businesses must submit:

• VAT201 returns (monthly or bi-monthly)

• Maintain full VAT records for 5 years

• Issue compliant tax invoices

Missing returns can lead to penalties and compliance blocks.

Useful External Links (Outbound for SEO)

• SARS VAT Registration Info: https://www.sars.gov.za

• SARS VAT101 Form Details: https://www.sars.gov.za/types-of-tax/value-added-tax/

• CIPC Company Information: https://www.cipc.co.za/

Conclusion

VAT registration is an important compliance requirement for South African businesses. Because SARS enforces the R1 million rule strictly, companies must monitor their turnover throughout the year. Whether you need compulsory or voluntary registration, it is essential to understand your responsibilities and stay compliant.