VAT stands for Value-Added Tax. It’s a consumption tax charged on most goods and services bought and sold in South Africa — the standard rate is 15%, and it’s included in the price of almost everything you buy, from a loaf of bread to a consulting invoice. When you see “incl. VAT” on a price, this tax is part of what you pay.
The one-sentence version
VAT is added to the price of most goods and services at 15%, businesses collect it on behalf of SARS, and the consumer is the one who ultimately carries it.
How VAT actually works
VAT looks like a tax on businesses, but it isn’t meant to be one. Here’s the flow:
- A registered business (called a vendor by SARS) charges you VAT on top of its selling price. This is its output tax.
- The same business pays VAT on the goods and services it buys. This is its input tax.
- Every two months, the vendor files a VAT201 return and pays SARS the difference: output tax minus input tax.
So the business is really a collector. The consumer pays the VAT in the final price, and the business passes it on to SARS. That’s why the VAT in a R1,150 price is R150 — you’re paying 15% of the R1,000 that the seller keeps.
The three categories of supplies
Not everything attracts 15%. SARS splits supplies into three groups:
| Category | Rate | Examples |
|---|---|---|
| Standard-rated | 15% | Most goods and services — electronics, clothing, restaurant meals, professional fees |
| Zero-rated | 0% | Basic foodstuffs (brown bread, maize meal, samp, rice, dried beans, lentils, tinned sardines, milk, eggs, fresh fruit and vegetables), petrol and diesel, illuminating paraffin, exports, international transport |
| Exempt | No VAT at all | Most financial services, residential rent, school fees, public road passenger transport |
The distinction matters more than it sounds. Zero-rated items are inside the VAT system but taxed at 0% — a vendor still accounts for them on its return and can claim input tax on related costs. Exempt items are outside the system entirely: no VAT is charged, but no input tax can be claimed on costs linked to them either.
For the mechanics and a full worked example, read our guide to how VAT works in South Africa.
Who must charge VAT
Only registered vendors charge VAT. You must register once your turnover of taxable supplies reaches R2.3 million a year — a threshold raised from R1 million on 1 April 2026, the first change since 2009. Voluntary registration is possible from R120,000 of turnover, and registration happens within 21 business days of crossing the limit.
If you’re not registered, you don’t charge VAT — but you also can’t claim it back on your purchases, which matters when your customers are themselves VAT-registered businesses. Our guide to how to register for VAT walks through the process.
Why VAT matters to you
VAT is the biggest single source of tax revenue in South Africa, and it’s also the most visible: it’s inside nearly every price you pay. Two things are worth understanding about your own money:
- “Incl. VAT” and “excl. VAT” mean different totals. A R1,000 price excluding VAT costs R1,150 including it. Getting these mixed up is one of the most common pricing mistakes — see our explainer on VAT-inclusive vs exclusive pricing.
- You can’t opt out. Unless the item is zero-rated or exempt, VAT is in the price whether or not you ask for a receipt. SARS doesn’t refund VAT to consumers on everyday purchases.
The rate history: 15% since 2018
The standard rate has been 15% since 1 April 2018, when it rose from 14%. The increases proposed in the 2025 Budget (15.5% from May 2025 and 16% from April 2026) were reversed before taking effect, and the 2026 Budget confirmed the rate stays at 15%.
If you’re checking an old invoice, remember: a 14% VAT-inclusive price back-calculates differently from a 15% one. The VAT calculator lets you change the rate to check.
Where to verify
- SARS — Value-Added Tax — the official rules, rates and registration information.
- SARS — Budget 2026 FAQs — the confirmed 15% rate and new registration thresholds.
- SARS — Small Business Taxpayers — thresholds that affect small businesses from 1 April 2026.
Want to see what 15% does to a price? Try the VAT calculator — it adds or removes VAT in either direction in seconds.