Case Studies
South Africa’s VAT Exemption for Schools: What Nonprofit & Education Entities Should Know
Starting 2026, schools in South Africa become largely VAT exempt—institutions must deregister and handle past VAT returns to align with the new rules effectively.
By NomadicTax Research Team • 5-8 min read • August 24, 2026
## Policy Shift
From **1 January 2026**, schools in South Africa became **VAT exempt** for all supplies except those related to qualifying welfare activities. SARS officially called on schools to apply for **VAT cancellation** following this legislative change. ([sars.gov.za](https://www.sars.gov.za/whats-new-at-sars/2/?utm_source=openai))
## Steps Affected Schools Must Take
- Submit **VAT123e form** to cancel VAT registration, citing reason: “All enterprise activities have ceased on 31 December 2025”.
- For supplies related to welfare activities that remain taxable, obtain a **ruling** from the Commissioner to stay registered for those specific activities.
- Where exit VAT is due, deal with any required payments or payment arrangements—VAT registration is only cancelled once exit VAT is settled.
- Correct any VAT returns already submitted for periods since 1 January 2026 if they contain VAT-charged sales or input VAT claims that are no longer valid.
## Implications for Schools & Related Organizations
- **Non-profit entities** will likely see cash flow relief, as VAT charged on issuance of goods/services is no longer collectible.
- **Welfare-type income** needs to be carefully separated and potentially remain taxable unless exempt by ruling.
- **Remedial work** necessary: past returns may need amending. This can involve resource costs or coordination with finance teams/auditors.
## Example Scenario
- A school that sells uniforms (a non-welfare activity) would have previously charged VAT on the uniforms and claimed input VAT on related supplies. Now, unless a ruling specifies uniform sales as a welfare activity, VAT on uniforms must be ceased, and input VAT claims for related purchases may need to be adjusted.
- If exit VAT arises (say, for inventories or assets purchased when VAT registered), such must be declared and paid before VAT cancellation can be effected.
## Practical Recommendations
- Schools should consult with tax advisors to determine which income streams qualify as welfare and whether obtaining a ruling is feasible.
- Review and classify historical supplies and inputs back to 1 January 2026 to determine any VAT liabilities or claims that need correction.
- Keep detailed records to support any amendments to past returns or rulings.
- Engage proactively with SARS if time or resource constraints make compliance challenging.
This change simplifies VAT obligations for schools but requires careful action to avoid penalties or unintended tax liabilities.