Big VAT win for South African businesses 

The value-added tax (VAT) registration thresholds for businesses in South Africa have been increased for the first time in over a decade and a half.

This comes after repeated calls from South African companies, particularly small businesses, for the threshold, which has not changed since 2009, to be raised.

In the 2026 Budget, the compulsory VAT registration threshold was increased from R1 million to R2.3 million, effective from 1 April 2026.

The voluntary VAT registration threshold was also raised from R50,000 to R120,000.

In his Budget Speech, delivered on Wednesday, 25 February, Finance Minister Enoch Godongwana responded to calls for the threshold to be raised.

He explained that, each year, the Treasury asks South Africans to send in their “Tips for the Budget”. “This year, more than 1,200 citizens sent us their opinions and suggestions,” he said.

One such suggestion, he said, came from a small-business owner in Gauteng, Renette Oosthuizen.

Godongwana said Oosthuizen asked him to increase the VAT registration threshold for small businesses to R2 million. 

She reportedly told the minister that the R1 million threshold has not kept pace with the cost of doing business.

“Renette, you will be happy to know that in this budget, the compulsory VAT registration threshold increases from R1 million to R2.3 million,” Godongwana said.

ENSafrica tax executive Charles de Wet previously explained that the R1 million threshold had remained unchanged since 2009.

While it wasn’t expected to change every year, 2009 to 2025 is “a very long time”, De Wet said, especially considering that inflation has been at an average of over 5% for that period.

He explained that, using that 5% inflation rate, a company earning R1 million in 2009 would be earning almost R2.3 million in 2025.

In other words, this has resulted in many more companies being registered for VAT than there should be if the law had kept pace with inflation.

Raising the VAT registration threshold was not the only support announced for small businesses in the 2026 Budget.

Godongwana also announced that the Treasury would raise the capital gains tax exemption for the sale of a small business by older persons from R1.8 million to R2.7 million. 

He explained that this applies to small businesses with a value of R15 million, rather than the R10 million previously. 

“It will enable small business owners to receive more tax relief when they sell their businesses,” the minister explained.