Accounting · 7 min read

Published 2026-05-02

The R1 million rule — when you must register

South African law is clear: if your taxable supplies exceed R1 million in any consecutive 12-month period, you have 21 days to register for VAT with SARS. Not "from the start of next financial year". Not "when your accountant gets to it". Twenty-one days.

The rule also applies if you have reasonable grounds to believe you'll exceed R1m in the next 12 months — for instance, you've just signed a contract that puts you over the threshold.

What "taxable supplies" actually means

This trips a lot of small businesses up. Taxable supplies = your standard-rated + zero-rated sales, but NOT your exempt sales. Examples:

• If you're a plumber billing customers for callouts: standard-rated, counts toward R1m.
• If you're a residential landlord: rental income is exempt — does NOT count toward the threshold.
• If you export goods: zero-rated, counts toward the threshold.

This is where you need an accountant: getting the classification wrong means you either register too early (admin burden) or too late (penalties).

Voluntary registration — why some small businesses choose it

You can register voluntarily once your taxable supplies exceed R50,000 in 12 months. Why would you? Three real reasons:

1. You sell mostly to other VAT-registered businesses. They claim the input VAT back, so the price doesn't matter to them — but if you're VAT-registered you can claim back input VAT on your own purchases.
2. You're growing fast. Registering now means no scramble at the R1m threshold.
3. Credibility. Some larger clients won't deal with non-VAT vendors.

The SARS calendar (2026)

• VAT Category B (most common, 2-monthly): returns due by the 25th of the month after the period ends. So Jan-Feb returns are due 25 March.
• Provisional tax 1st payment: end of August.
• Provisional tax 2nd payment: end of February.
• Provisional tax 3rd (top-up): 30 September following year-end (optional but avoids penalty interest).
• EMP201 (PAYE/UIF/SDL): 7th of every month.
• EMP501 reconciliation: 31 May (mid-year), 31 October (annual).

Penalties if you miss

Late VAT submission: 10% of VAT due + interest (interest currently around 11% per annum, compounded daily). Late registration when over the R1m threshold: 10% penalty on the VAT that should have been collected. Worst case: SARS can assess you for back-VAT for up to 5 years.

Records you must keep — and for how long

5 years from date of submission, for everything: invoices issued, supplier invoices received, bank statements, contracts, VAT201 returns, EMP201 returns. Digital is fine — SARS accepts electronic records.

The trick most accountants don't tell you

If you're approaching R1m, look at which 12 months you're measuring. SARS uses any rolling 12 months — but if your business is seasonal (e.g. high in Dec, low in Aug), you might cross the threshold for one rolling window and dip below the next. The 21-day rule still applies once you cross it for the first time.

Have a specific question about your business? Books, our AI accounting assistant, answers SARS questions for SA SMEs 24/7.

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