VAT Threshold Increased to Support South African Businesses
Finance Minister Enoch Godongwana has announced a significant adjustment to the compulsory VAT registration threshold for businesses in South Africa, increasing it from R1 million to R2.3 million. The change was revealed during the 2026 Budget Speech and is aimed at easing the administrative burden on small and medium-sized enterprises (SMEs).
The VAT registration threshold had remained unchanged since 2009, requiring businesses to register for VAT once their annual turnover exceeded R1 million. Over the years, many SME advocates and tax professionals argued that the outdated threshold no longer reflected the realities of rising costs and inflation, placing unnecessary compliance pressure on smaller businesses.
Critics of the previous threshold noted that once businesses approached the R1 million mark, many owners had to shift their focus from growth and operations to complex administrative and tax compliance requirements. For smaller enterprises with limited resources, this often created a barrier to expansion.
According to Godongwana, the decision to increase the threshold was partly influenced by public feedback submitted through the “Tips for the Budget” initiative, where South Africans can provide suggestions for government policy. A small business owner from Gauteng highlighted that the threshold had not kept pace with the cost of doing business over the past 17 years, prompting calls for reform.
The new R2.3 million threshold broadly aligns with inflation over the period since the original limit was set. The adjustment is expected to reduce compliance pressures on many small businesses, allowing them to prioritize growth, job creation, and operational efficiency.
In addition to the VAT change, the National Treasury also introduced measures aimed at supporting small business owners who plan to exit or sell their enterprises. The capital gains tax exemption for the sale of a small business by individuals aged 55 and older has been increased from R1.8 million to R2.7 million.
Furthermore, the qualifying business value limit has been raised from R10 million to R15 million. According to the Minister, this change will enable small business owners to receive greater tax relief when selling their businesses, providing stronger financial support during retirement or business transitions.
Together, these measures form part of broader efforts by government to support entrepreneurship and strengthen South Africa’s small business sector.
Do you need a Quote for our Tax and Accounting Services?
Contact our team via any of the following channels to get a proposal for your accounting and tax services:
Subscribe to our newsletters.
Purchase Contract TEMPLATES and BUSINESS STATIONERY at www.ZEELIEONLINE.com
Disclaimer:
The views or opinions expressed on this site are solely those of the original authors and other contributors.
The material and information contained on this website is for general information purposes only.
This information is for general purposes only. Don't use this information for making business, legal and tax decisions without consulting a professional.
We do not make any express or implied representation, as to the completeness or accuracy of the information published.
Tax law regularly changes, so any tax information on this site could become outdated.
We are not responsible for any other websites that you may access through links on our website.
ZPA accepts no liability for any loss or damage arising from the use of any material on this site.
