SARS Orders Schools to Deregister for VAT Immediately
PRETORIA — The South African Revenue Service (SARS) has issued an urgent directive to educational institutions, calling on schools to formalise their exit from the Value Added Tax (VAT) system. This move follows a significant legislative shift that reclassified school supplies as tax-exempt.
According to a statement released by the revenue collector on Friday, schools registered under the South African Schools Act that are currently listed as VAT vendors must now apply for deregistration. This change is retroactive, stemming from legislation that came into effect on 1 January 2026. Under the new rules, all supplies made by schools are exempt from VAT, with the only exception being specific qualifying welfare activities.
SARS has clarified that as of the start of this year, schools are prohibited from charging VAT on their services or deducting input tax on their purchases. The revenue service further noted that any VAT returns already submitted for periods following 1 January 2026 must be corrected by the affected institutions to reflect the new exempt status.
To facilitate this transition, schools are required to submit a specific application form, the VAT123e, citing the cessation of enterprise activities as of 31 December 2025. The tax authority has provided multiple channels for this process, including a dedicated email service and the eBooking system for virtual appointments.
The transition carries financial implications for institutions that have accumulated assets. SARS warned that where exit VAT is payable, schools must either settle the debt or submit a formal request for payment arrangements alongside their deregistration forms. The cancellation of VAT registration will only be finalised once these tax obligations are met or a payment plan is agreed upon.
This policy shift is intended to simplify the financial administration of the country’s educational sector. By removing schools from the VAT net, the government aims to reduce the compliance burden on school boards and administrative staff, although it necessitates a final settlement of tax liabilities incurred while the schools were active vendors.
Educational institutions that believe they qualify to remain in the VAT system due to welfare activities must seek a specific ruling from the Commissioner. SARS has published comprehensive reference guides and frequently asked questions on its digital platforms to assist school administrators through the technicalities of the exit process.
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