Private schools in for massive tax shock in South Africa
Schools in South Africa are facing a major tax shock as government prepares to push them out of the VAT system.
Under the Draft Taxation Laws Amendment Bill, released last week for public comment, all schools will be forced to deregister as VAT vendors from 1 January 2026.
However, while all schools are implicated, the amendment also specifically clarifies that this applies to private schools.
“There are numerous schools registered for VAT that will now cease to be vendors,” Treasury said in a note.
For years, tuition and boarding fees have been VAT-exempt. Section 12(h)(i) excludes tuition and related services.
Additionally, section 12(h)(ii) provided exemptions for goods or services supplied by schools if they were incidental to education and paid for in the form of school fees, tuition, or board and lodging.
The wording, however, implied that when schools supplied goods or services for other kinds of payment, such as rental for facilities or fees for uniforms, these were taxable supplies, requiring VAT to be charged.
Many schools, therefore, registered as VAT vendors to comply, charging VAT on these commercial activities while also claiming back input VAT on construction, uniforms, or general overheads.
The draft Taxation Laws Amendment Bill 2025 was recently published by National Treasury for public comment.
“Included in the proposed amendments are significant changes regarding the supply of educational services. In particular, the amendments will have a major impact on schools that are currently registered as VAT vendors,” said WTS Renmere tax specialist Duane Shipp.
The new proposal changes the wording of the law so that all goods and services supplied by schools are VAT-exempt, not just tuition and boarding.
This closes the gap that allowed schools to register and claim VAT on other activities. “The implication is that all supplies by schools, regardless of whether they are in return for school fees or not, will be exempt from VAT,” Shipp explained.
Potential cost implications
National Treasury said the intent was always to exclude schools from VAT, but the change will have a big financial knock-on effect.
Once schools are forced to deregister, the VAT Act treats this as if they sold their assets immediately before deregistration. That means a large “deemed supply” tax bill will be triggered on 31 December 2025.
“The financial implications of this deemed supply could be significant. It could result in a substantial VAT liability owing to SARS, right at the point when schools are forced to deregister,” warned Shipp.
Treasury has tried to soften the impact by allowing schools to pay this tax bill in twelve monthly instalments instead of all at once.
It also proposed new rules that make the tax due with each instalment, so schools avoid penalties and interest.
However, Shipp said the measures do not solve the bigger problem which is that schools will have little to no time to plan or budget for the significant VAT liability which will arise because of their deregistration as vendors.
The draft law also makes it clear that SARS will not revisit past VAT assessments after 1 January 2026. Schools can apply to amend assessments that are still open, but VAT already charged on things like hall rentals or uniforms will not be refunded.
These changes raise important questions such as why the supplies of goods and services by schools are being treated differently from those made by universities, technikons and colleges, and why not allow schools registered as VAT vendors more time to prepare.
Schools have until 12 September 2025 to send written comments on the draft amendments to National Treasury or SARS.
Shipp said schools should not delay. “It is highly recommended that schools submit their comments, either individually or collectively, before the closing date.”
Loading ...