One prerequisite: You can only choose either VAT or Turnover Tax.

There is one strict rule in South Africa’s micro-enterprise tax system:Taxpayers who are registered for VAT are no longer eligible for the Turnover Tax.. These two types of taxes are mutually exclusive; they are not cumulative.

So for small and medium-sized sellers on Takealot, after the threshold adjustments in 2026, the real question isn’t “Should I register for VAT?” but “Which path should I take?”

According to the guidelines announced by the South African Revenue Service (SARS) in the February 25, 2026, budget and effective as of April 1, 2026:

• Mandatory VAT registration threshold: 1 million rand → 2.3 million rand
• Voluntary VAT registration threshold: 50,000 rand → 120,000 rand
• Turnover Tax Threshold: Raised Simultaneously to 2.3 million rand, tax-exempt amount 600,000 rand
• Standard VAT Rate: Remains Unchanged 15%

The specific provisions are subject to the official SARS website and the final legislative text; as of the time of this writing, the 2026 Rates Bill is still in the draft stage.

What Are the Benefits of Turnover Tax?

The Turnover Tax is designed to provide micro-enterprises with an option that involves low compliance costs:

• Replacement with a Single Tax...will no longer pay income tax separately, but will be taxed on a progressive basis based on revenue
• Low reporting frequency, The annual filing is supplemented by two interim filings; there is no need for monthly or bimonthly filings.
• Below the tax-free allowance, the amount is zero., the portion below 600,000 rand is tax-exempt
• A complete system of input invoices is not required...friendly to small sellers who can't provide official invoices

For sellers who are just starting out, have annual revenue of less than one million rand, source from small workshops or individuals, and are unable to obtain compliant input invoices, the overall cost of this approach is typically lower than that of VAT.

But the catch is: the revenue doesn't make up for a single penny of it.

This is the most critical flaw of the Turnover Tax.The 15% import VAT you paid upon importation is not deductible under the Turnover Tax system.

South Africa effectively abolished the VAT exemption for low-value imported goods starting in September 2024, and the Taxation Laws Amendment Act 2026 further codified this change into law. The VAT exemption for small packages valued at less than R500 has ended, and they are now uniformly subject to customs duties plus 15% VAT.

This means that as long as your goods are imported from abroad for sale in South Africa, you must pay the 15% import tax upfront. Under the VAT system, this amount can be offset against output tax; under the Turnover Tax system, it becomes a pure cost.

So the key factor isn’t the size of your revenue, but rather: what percentage of your cost structure is made up of input taxes.

How should I understand the tax exemption and progressive tax structure?

Turnover Tax is calculated on a progressive basis based on turnover; the portion up to 600,000 rand is generally exempt, and the portion exceeding that amount is taxed at tiered rates. The specific tax brackets and rates are adjusted annually in accordance with the budget,The latest tax rate table officially released by SARS shall prevail.The

A helpful reminder: The progressive scale is based onTotal Annual RevenueDetermine the applicable tax bracket rather than applying the lower bracket separately to the excess amount. When calculating, do not rely on the intuitive assumption that “it’s only a little more” to judge a jump in the tax burden.

Three Criteria for Evaluation

Ask yourself the following questions in this order:

1. Is the customer a B2B client? Business buyers require tax invoices that include VAT for input tax credits; if a business is not registered for VAT, it will immediately lose such orders.
2. Scale of imports and local procurement. The higher the input VAT, the greater the value of the VAT credit, and the less reason there is to choose the Turnover Tax.
3. Can we handle bimonthly reporting? VAT201 must be filed every two months; late filings result in fines and interest. If a company lacks stable financial support, the cost of compliance can become a burden.

The timing of a switch is more important than the choice itself.

Sellers who are already registered for VAT and are considering deregistering due to the increased threshold should first weigh two factors: first, the input tax credits they will lose after deregistration, and second, whether their customer base will be affected.

Conversely, the transition from turnover tax to VAT is a one-way process; once made, it is difficult to reverse in the short term. It is recommended to perform the necessary calculations before your revenue approaches 2.3 million rand, rather than waiting until you exceed that threshold and then having to deal with the situation reactively.

After crossing the line, you must Within 21 business daysSubmit your VAT registration application. If you fail to register by the deadline, SARS may retroactively register your business and hold you liable for VAT that you never charged your customers, plus interest and penalties.

If you’re verifying that your materials align with the reporting guidelines, feel free to contact a consultant at Qicaiying (WeChat/Phone: 18676749275), and we’ll walk you through the entire process from start to finish.