If you run a business in South Africa, VAT is probably the tax you interact with most often — and the one most people get wrong. This guide covers the full mechanics: who pays what, how the VAT201 return works, what an invoice must show, and what happens if you’re late.
The core idea: output tax minus input tax
VAT is a tax on consumption, collected in slices along the chain from manufacturer to consumer. A registered vendor:
- charges VAT on its sales — this is output tax;
- pays VAT on its business purchases — this is input tax;
- files a return and pays SARS the difference.
Here’s a worked example. Say you run a furniture shop, are registered for VAT, and in one two-month period you:
- sell R50,000 of furniture (excluding VAT). Output tax = R50,000 × 15% = R7,500;
- buy stock and supplies costing R20,000 (excluding VAT). Input tax = R20,000 × 15% = R3,000.
Your VAT201 for the period shows:
| Line | Amount |
|---|---|
| Output tax (VAT you charged customers) | R7,500 |
| Input tax (VAT you paid suppliers) | R3,000 |
| Payable to SARS | R4,500 |
If your input tax exceeds your output tax — common in export businesses, or during a big purchase year — SARS refunds the difference instead. That’s what makes VAT neutral for businesses: you pass on what you collect, and claim back what you paid.
The consumer is the one who bears the VAT in the final price. The shopkeeper never “pays” 15% of everything — only the difference between what was collected and what was paid.
The return: VAT201, every two months
SARS assigns your VAT filing category; many vendors file every two months. For returns and payments made through eFiling, the deadline is generally the last business day of the month after the tax period. The ordinary deadline for other submission methods is the 25th, with weekend and public-holiday adjustments. Confirm the date and payment channel on your account.
What you owe is calculated as:
Output tax − input tax = VAT payable (or refund)
Late payment can attract a 10% penalty and interest at the applicable prescribed rate. Rates change: check SARS rather than relying on a fixed percentage in an old article. Maintain a filing calendar, reconcile the return and allow enough time for the payment to reach SARS.
What a proper VAT invoice must show
If you’re registered, every tax invoice you issue must show:
- the words “tax invoice” (or similar);
- your name, address and VAT registration number;
- the customer’s name, address and VAT number if the customer is a registered vendor (for full invoices over R5,000);
- a description of the goods or services;
- the date and a unique invoice number;
- the value, VAT and total; alternatively, the VAT-inclusive total with a statement that VAT is included and the applicable rate;
- for zero-rated supplies, a statement that they’re zero-rated.
An abridged invoice is permitted where consideration is R5,000 or less. A tax invoice is generally not required for consideration of R50 or less, though supporting records still matter. Issue required invoices within 21 days of supply and check the official SARS checklist, including quantity and recipient details where applicable.
Records: keep them for five years
SARS can ask for your records — invoices, receipts, bank statements, stock records — for five years. For a small business the practical rule is simple: whatever supported your VAT claims must survive an audit. Missing records turn a routine return into a dispute you can’t defend.
Who must register
The rules changed on 1 April 2026, for the first time since 2009:
- Compulsory registration kicks in once your turnover of taxable supplies (standard-rated plus zero-rated) exceeds R2.3 million a year — up from R1 million. You must register within 21 business days of crossing the threshold.
- Voluntary registration is possible from R120,000 of annual turnover — up from R50,000.
Only taxable supplies count toward the threshold: standard-rated and zero-rated sales. Exempt supplies (financial services, residential rent, school fees) don’t count, even if they’re your main income.
Already registered but now turning over less than R2.3 million? You can apply to deregister — but see the next section before you do.
Deregistering is a tax event, not paperwork
With the higher threshold, many small vendors are deregistering. Before you do: when you deregister, the assets of your business on which you claimed input tax — trading stock, equipment, property — are treated as deemed supplies, and VAT may be payable on their value (section 8(2) of the VAT Act). Deregistration also requires that you have no outstanding returns or debts.
Run the numbers before submitting the VAT123e form. The small-business guide walks through when staying registered still makes sense.
Zero-rated and exempt: the two things that aren’t 15%
- Zero-rated (0%): basic foodstuffs such as 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. These appear on your return at 0% and you can still claim input tax on related costs.
- Exempt: qualifying financial services, residential rent, educational services and public road passenger transport. They do not attract output tax, and related input tax is generally not deductible. The VAT201 includes an exempt/non-supply field: do not simply omit these amounts from your records or return.
The distinction between the two is one of the most common compliance errors — see what is VAT? for the full breakdown.
Where to verify
- SARS — Value-Added Tax — the official VAT rules and guides, including the VAT 404 guide for vendors.
- SARS — Budget 2026 FAQs — confirmation of the new thresholds and interest rates.
- SARS — Small Business Taxpayers — the R2.3 million VAT and Turnover Tax thresholds.
Need the numbers on a specific transaction? The VAT calculator adds or removes VAT at 15% (or any rate you set) in either direction — and our guide on how to register for VAT covers the registration process step by step.