Following the 2026 Budget Speech, the Minister of Finance announced an increase in the VAT registration thresholds. The compulsory registration threshold has been raised from R1 million to R2.3 million, while the voluntary registration threshold has increased from R50 000 to R120 000. These changes will take effect from 1 April 2026.
This change presents several advantages but also introduces certain drawbacks. VAT registration requires more accurate accounting records and more requirements regarding tax invoices that needs to be met. For many small and medium-sized enterprises, these administrative requirements were difficult, and it might have hampered growth, and some business owners kept the turnover of the business under the threshold.
However, the change may also hinder the growth of smaller companies, as many tenders and larger projects require service providers to be VAT registered. For businesses that previously struggled to meet the R50 000 threshold, the higher voluntary registration threshold may result in VAT registration being substantially more difficult to obtain.
It is important to note that businesses that traded above R1 million before 1 April 2026 were still required to register for VAT under the previous legislation. If a business failed to register when required, SARS may backdate the VAT registration prior to 1 April 2026 although the turnover may be lower than the current R2.3 million requirement.