Entity Setup
Schools Exiting VAT: Understanding the Deregistration and Exit VAT Obligations
If you run a school under the South African Schools Act, 2026 changes mean you may need to deregister for VAT and account for exit VAT—here’s what to watch and how to act.
By NomadicTax Research Team • 5-8 min read • September 5, 2026
## What Has Changed for Schools?
Legislative amendments in **Taxation Laws Amendment Act 5 of 2026**, effective 1 January 2026, have altered the VAT treatment of schools registered under the South African Schools Act. Supplies by such schools are now **exempt** under section 12(h)(iv), meaning most schools are no longer vendors under the VAT Act.([sars.gov.za](https://www.sars.gov.za/wp-content/uploads/Ops/Guides/Legal-Pub-Guide-VATRef02-VAT-Reference-Guide-Schools-Exiting-the-VAT-System.pdf?utm_source=openai))
## Deregistration & Exit VAT: What Schools Must Do
- Schools must apply for **VAT deregistration** by completing form **VAT123e**, indicating that “All enterprise activities have ceased on 31 December 2025”.([sars.gov.za](https://www.sars.gov.za/types-of-tax/value-added-tax/schools-exiting-the-vat-system-frequently-asked-questions/?utm_source=openai))
- Deregistration applications deadline: **30 September 2026**.([sars.gov.za](https://www.sars.gov.za/types-of-tax/value-added-tax/schools-exiting-the-vat-system-frequently-asked-questions/?utm_source=openai))
- Schools must account for **exit VAT** on goods and rights held as at 31 December 2025 on which input tax was previously claimed. Use lesser of cost or open market value.([sars.gov.za](https://www.sars.gov.za/types-of-tax/value-added-tax/schools-exiting-the-vat-system-frequently-asked-questions/?utm_source=openai))
## Practical Guidance & Reliefs Available
- School supplies VAT **exempt from 1 January 2026**, except when conducting welfare activities confirmed under a SARS ruling.([sars.gov.za](https://www.sars.gov.za/wp-content/uploads/Ops/Guides/Legal-Pub-Guide-VATRef02-VAT-Reference-Guide-Schools-Exiting-the-VAT-System.pdf?utm_source=openai))
- Schools must issue credit notes for VAT charged on or after 1 January 2026, and disclose these in VAT returns due on or before **November 2026**.([sars.gov.za](https://www.sars.gov.za/types-of-tax/value-added-tax/schools-exiting-the-vat-system-frequently-asked-questions/?utm_source=openai))
- Input tax not previously claimed (before 1 January 2026) may be claimed up to the **November 2026 tax period**.([sars.gov.za](https://www.sars.gov.za/types-of-tax/value-added-tax/schools-exiting-the-vat-system-frequently-asked-questions/?utm_source=openai))
- Payment of exit VAT: payable from **1 January 2027**, possibly in 12 equal monthly instalments – alternative arrangements may be agreed with SARS.([sars.gov.za](https://www.sars.gov.za/types-of-tax/value-added-tax/schools-exiting-the-vat-system-frequently-asked-questions/?utm_source=openai))
## Example Case
*Greenfield Primary School* is VAT-registered under the old rules. It must:
1. Complete VAT123e form stating cessation of enterprise activities as of 31 December 2025.
2. Deregister by submitting form by 30 September 2026.
3. Calculate exit VAT: say books and equipment bought previously with input tax claims now valued either at cost or market value. If cost was ZAR 200,000 and market value ZAR 180,000, use **ZAR 180,000**. Apply VAT fraction to this amount to compute liability.
4. Issue credit notes for any VAT charged from 1 January 2026 onward and adjust VAT returns.
5. If full payment is burdensome, request a payment plan starting 1 January 2027.
## Why This Change Matters Beyond Schools
- Schools will lose input tax deductions on ongoing purchases and must manage cash flows for exit VAT.
- Suppliers to schools must adjust invoicing, as schools will not accept input VAT in many cases.
- The change highlights how “enterprise” classifications, threshold and exemptions interact—important for other non-profit or education entities.
Category: Entity Setup / Compliance
Tax Home: Africa
Author: NomadicTax Research Team
ReadTime: 5-8 min