A major tax law change means schools are now exempt from VAT, but action is required before it’s too late
Introduction: What Changed and Why It Matters to You
Imagine you are a parent paying school fees, or a school principal managing a tight budget. Now imagine finding out that a big change in tax law directly affects how your school handles money — and that missing a deadline could mean penalties or complications.
That is exactly the situation many South African schools find themselves in right now.
The South African Revenue Service — better known as SARS (the government body that collects taxes in South Africa, similar to a national tax office) — has made an important announcement. From 1 January 2026, schools no longer need to charge VAT on most of their activities. This is a positive change, but it comes with a responsibility: schools that were previously registered as VAT vendors must now apply to be removed from the VAT system.
If your child goes to school, if you work at a school, or if you run one — this article is for you.
Section 1: What Is VAT and Why Were Schools Involved in It?
VAT stands for Value-Added Tax. It is a tax that businesses and service providers add on top of the price of goods or services they sell. For example, when you buy groceries or pay for a service, a portion of what you pay goes to the government as VAT.
Some schools in South Africa were registered as “VAT vendors” — meaning they were officially part of the VAT system and were required to:
- Charge VAT on certain services they provided
- Submit regular VAT returns (tax reports) to SARS
- Claim back VAT on things they bought (called “input tax”)
This applied to schools registered under the South African Schools Act — the main law governing public and independent schools in the country.
Section 2: The Big Change — Schools Are Now VAT-Exempt
Effective 1 January 2026, the law changed. Here is what it means in plain language:
Almost everything a school does is now exempt from VAT.
This means schools:
✅ Do not need to charge VAT to parents or students
✅ Do not need to include most school activities in VAT returns
✅ Are treated differently from regular businesses when it comes to tax
Think of it like this: previously, schools were treated somewhat like shops in the eyes of the tax system. Now the law recognises that schools are not profit-making businesses — they are educational institutions — and taxes them accordingly.
Section 3: What Schools Must Do Right Now
This is the most important part. Just because schools are now exempt does not mean they can sit back and do nothing. Schools that were registered as VAT vendors must formally apply to cancel (remove) their VAT registration.
Here is a simple step-by-step guide:
Step 1: Fill in the Correct Form
Schools must complete a form called the VAT123e — which is officially titled “Application for the Cancellation of Registration.”
When asked for the reason for cancellation, write exactly this:
“All enterprise activities have ceased on 31 December 2025”
This wording is important because it correctly tells SARS that the school’s VAT-related activities ended on the last day before the new law came into effect.
Step 2: Submit the Form — Two Ways to Do It
| Method | How to Do It |
|---|---|
| Send the completed VAT123e form to contactus@sars.gov.za with the subject line: VAT deregistration – Schools | |
| Virtual Appointment | Book online via the SARS eBooking system, select “Other” as the reason category, and choose “VAT and PAYE registration/deregistration” as the reason |
Choose whichever method is most convenient for your school’s administrative staff.
Step 3: Deal With Any Exit VAT (If Applicable)
Sometimes when a business or organisation leaves the VAT system, they may owe a final VAT payment. This is called “exit VAT” — think of it as a final settling of accounts before you leave the tax system.
If your school owes exit VAT:
✅ You can request a payment arrangement — meaning you ask SARS to allow you to pay in instalments rather than all at once
✅ Submit this payment arrangement request together with the VAT123e form
✅ SARS will only officially cancel your VAT registration after the exit VAT has been declared and either paid in full or a payment plan has been agreed upon
Section 4: What About Schools That Do Welfare Work?
Some schools do more than just teach. They may run feeding programmes, support vulnerable children, or carry out other qualifying welfare activities (these are specific community support activities recognised by law).
If a school wants to stay registered for VAT because of these welfare activities, the rules are different:
The school must get written confirmation from the SARS Commissioner (the head of SARS) through an official process called a ruling.
A ruling is basically an official written decision from SARS that says: “Yes, your specific welfare activities qualify, and you may remain in the VAT system for those purposes.”
Without this ruling, schools cannot simply choose to stay registered.
Section 5: What If a School Already Submitted VAT Returns for 2026?
Some schools may have already submitted VAT returns (monthly or bi-monthly tax reports) for periods from January 2026 onwards — perhaps not knowing about the law change.
SARS is clear on this:
Those returns must be corrected.
Schools need to go back and fix any VAT returns that were submitted for periods starting from 1 January 2026. This is important to avoid future complications or incorrect tax records.
Section 6: A Quick Summary of Key Points
| Topic | What You Need to Know |
|---|---|
| Effective Date of Change | 1 January 2026 |
| Who Is Affected | Schools registered under the South African Schools Act that were VAT vendors |
| What Changed | School supplies are now exempt from VAT |
| Action Required | Apply for cancellation of VAT registration |
| Form to Use | VAT123e – Application for Cancellation of Registration |
| Reason to State on Form | “All enterprise activities have ceased on 31 December 2025” |
| Email to Send Form | contactus@sars.gov.za |
| Subject Line of Email | VAT deregistration – Schools |
| Exit VAT | May be payable; payment arrangements can be requested |
| Schools With Welfare Activities | Must get a ruling from SARS Commissioner to stay registered |
| Incorrect 2026 Returns | Must be corrected immediately |
Section 7: What This Means for You
Whether you are a school principal, a governing body member, a finance administrator, or even a concerned parent, here is what this development means in real life:
For School Administrators and Principals:
✅ Your school no longer needs to charge VAT — this simplifies invoicing and fee structures
✅ You must act now to deregister — failure to do so could cause legal and administrative complications
✅ If your school runs welfare programmes, speak to a tax professional about applying for a ruling to stay in the VAT system
For School Governing Bodies (SGBs):
✅ Ensure your finance committee is aware of this change
✅ Check whether your school already submitted VAT returns for 2026 — if yes, those need to be corrected
✅ Confirm with your accountant or bookkeeper that the VAT123e form has been submitted
For Parents:
✅ Schools should no longer be charging VAT on most services from January 2026
✅ If you notice VAT being charged on school invoices after this date, raise it with the school’s management
✅ This change is meant to simplify costs and administration for schools — which can indirectly benefit learners
Section 8: Where to Get More Help
SARS has made additional resources available on their official website. These include:
📄 VAT Reference Guide – Schools Exiting the VAT System
A detailed guide explaining the legal and practical aspects of the change
📄 Schools Exiting the VAT System: Frequently Asked Questions (FAQs)
Common questions answered in a clear format — useful for finance staff and administrators
For media or official queries, contact: SARSMedia@sars.gov.za
Conclusion: Act Now, Avoid Problems Later
This change in VAT law is ultimately good news for schools. It recognises that educational institutions are not ordinary businesses and should not be burdened with the same tax obligations.
But good news still requires action.
If your school was registered as a VAT vendor, the clock is ticking. The right form needs to be submitted, old VAT returns may need to be corrected, and if welfare activities are involved, a formal ruling must be obtained.
The process is straightforward — and SARS has provided clear guidance and support channels to help schools through it.
📢 Please share this article with school principals, governing body members, school accountants, and parent associations. Many schools may not yet be aware of what they need to do. Awareness is the first step toward compliance — and compliance protects your school.
Source: Official Media Release by the South African Revenue Service (SARS), dated 7 August 2026
For official information, visit: www.sars.gov.za
Media enquiries: SARSMedia@sars.gov.za
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