SARS is coming after private schools in South Africa
Private schools in South Africa registered for VAT face a significant tax change that could leave some owing money to the South African Revenue Service (SARS), with the first payments due from January 2027.
The change follows amendments to the VAT treatment of schools proposed in the 2025 tax laws and promulgated on 1 April 2026.
While the changes took effect from 1 January 2026, schools may have overlooked the requirement to deregister because the legislation was only formally promulgated later.
SARS has confirmed that schools registered under the South African Schools Act must deregister as VAT vendors, meaning they can no longer charge VAT or claim input tax deductions on their activities from 1 January 2026.
“The South African Revenue Service (SARS) calls on schools registered under the South African Schools Act that are registered as VAT vendors to apply for cancellation of their VAT registration,” SARS said.
The change affects schools that previously qualified for VAT registration because of income generated from activities outside their core educational services.
Education provided by these schools is generally exempt from VAT, but some schools also generate income by renting out sports facilities or halls, operating tuckshops or providing accommodation.
Where the value of taxable activities exceeded the VAT registration threshold of R1 million, schools could register as VAT vendors and claim input VAT on a portion of their expenses, subject to the applicable apportionment rules.
That position has now changed. From 1 January 2026, supplies made by schools are exempt from VAT, except where a school conducts qualifying welfare activities.
Schools must therefore correct VAT returns submitted for periods from that date where necessary. The deregistration also creates what is known as “exit VAT”.
This is calculated at the VAT fraction of 15/115 on the lower of the cost or open-market value of assets that formed part of the school’s VAT enterprise at 31 December 2025 and on which input VAT was previously claimed.
This could include furniture, equipment and consumables such as stationery and cleaning products.
SARS and Treasury remain open to work with schools
Because schools can have a mixture of exempt and taxable activities, the calculation can be complicated, and the appropriate apportionment rules must be considered.
Deregistration is not automatic. Schools must apply to SARS using the VAT123e form. SARS said schools can request payment arrangements if exit VAT is payable.
The government has also provided some relief on the timing of these payments.
SARS said schools will only become liable for exit VAT from 1 January 2027 and can pay the amount in 12 equal monthly instalments. Schools needing longer than 12 months must agree this with SARS upfront.
“The proposed VAT amendment will be implemented, with the output tax payments only beginning from 1 January 2027,” National Treasury said.
The change has raised concerns among school bodies and representative organisations, which have warned that the additional costs could place further pressure on independent schools and potentially contribute to higher fees for parents.
There is also a proposal for the government to grant schools an amnesty on input VAT previously claimed but now deemed erroneous under the amended rules.
Treasury said, however, that this would require a broader government decision and is not something that SARS or its tax policy team can decide independently.
The Independent Schools Association of Southern Africa (ISASA) has taken the proposal to the Department of Basic Education, with a response still pending.
“In the interim, National Treasury is committed to assisting these schools to find a solution,” Treasury said.
It added that it and SARS would continue engaging with ISASA and affected schools during 2026 before the first instalment becomes due.
“The intention of the proposed VAT amendment has always been to assist the schools,” Treasury said.
It added that SARS and Treasury would remain open to schools facing administrative or practical difficulties with deregistration to discuss possible solutions.
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