South African schools leave the VAT system, backdated to January

What changed in detail

The Taxation Laws Amendment Act 5 of 2026 (Government Gazette 54448, 1 April 2026) inserted a new section 12(h)(iv) into the VAT Act 89 of 1991 exempting the supply of any goods or services by a school registered or provisionally registered under the South African Schools Act, 1996, excluding supplies made in respect of welfare activities carried on by a welfare organisation as confirmed in a ruling issued by the Commissioner under section 41B. Section 42(2) provides that it comes into operation on 1 January 2026. The same section removed schools from the pre-existing educational-services exemption in section 12(h)(i)(aa) and deleted ‘school’ and ‘school fees’ from section 12(h)(ii), so a school’s entire output is now exempt rather than only its educational services. SARS issued a media release on 7 August 2026 calling on affected VAT-registered schools to apply for cancellation of their VAT registration; schools conducting qualifying welfare activities may remain registered but must apply for a section 41B ruling by 30 September 2026.

What it means

The exemption has been in force for nearly eight months and the SARS media release is the first push to act on it. Exiting the VAT system is not costless: deregistration triggers output tax on assets held at that point, so schools that have recovered input tax on buildings, buses or equipment face an exit charge. The arithmetic, not the paperwork, is the reason to start early.