Gauteng schools face new VAT rules as SARS requirements change

The Gauteng MEC for Education, Sport, Arts, Culture and Recreation, Lebogang Maile, has warned schools about new SARS VAT treatment and the need to comply with the requirements of the South African Revenue Service (SARS).

Maile has called on all affected schools in Gauteng to take immediate note of changes to the Value-Added Tax (VAT) treatment of schools and to ensure full compliance with SARS requirements.

The changes arise from amendments to the VAT Tax Act, 1991, introduced through the Taxation Laws Amendment Act 5 of 2026, with effect from January 1, 2026.

ALSO READ: New prefect team takes leadership roles at Assumption Convent School

In terms of the amended VAT framework, supplies made by schools registered under the South African Schools Act are exempt from VAT from January 1, 2026. Consequently, most affected schools no longer conduct an “enterprise” for VAT purposes and are required to exit the VAT system.

Importantly, deregistration is not automatic. Schools that remain registered as VAT vendors must apply to SARS for deregistration.

“We call on principals, School Governing Bodies and those entrusted with the financial administration of our schools to familiarise themselves with these changes and ensure that their institutions comply. Good governance requires that every school understands its financial and statutory obligations and acts accordingly,” said Maile.

Schools must also understand that the change does not mean that all their existing VAT responsibilities simply disappear. SARS has indicated that schools must continue submitting the required VAT returns while their VAT registrations remain active. These will generally be nil returns, except in circumstances where adjustments are required.

ALSO READ: Ekurhuleni golfers shine at SA U19 Girls High Schools Championship

Schools that charged VAT on supplies on or after January 1, 2026, must declare that VAT in the relevant VAT201 return.

Where a school subsequently issues a credit note and refunds the VAT to the recipient, the relevant adjustment may be made in accordance with SARS requirements.

Affected schools must also pay particular attention to what SARS describes as “exit VAT”. In terms of Section 8(2) of the VAT Act, a school may be required to account for VAT on certain goods and rights that formed part of its VAT enterprise and were retained when it ceased conducting that enterprise.

This may include certain trading stock, equipment, furniture, improvements to property and other enterprise assets where input VAT was previously deducted. SARS indicates that the relevant position is determined with reference to assets held immediately before schools ceased conducting an enterprise, effectively as at December 31, 2025.

However, not every asset automatically attracts exit VAT. Among other exclusions identified by SARS are goods or services on which input tax was denied, as well as donated goods or assets acquired for no consideration where the relevant cost is regarded as nil.

ALSO READ: Ekurhuleni South leads demand as Gauteng school admissions open

SARS has further provided transitional relief to schools in relation to the payment of exit VAT. Schools will only become liable to pay the exit VAT from January 1, 2027, and will be permitted to pay the amount in 12 equal monthly instalments. Where a school requires a period longer than 12 months, this must be agreed with SARS upfront.

SARS has indicated that penalties and interest will not be imposed on the exit VAT where payment is made in the prescribed 12 monthly instalments from January 1, 2027, or within another period agreed with SARS.

“We want schools to understand both the opportunity and the responsibility created by these changes.

“This is not simply an accounting exercise. School finances are public resources entrusted to institutions for the benefit of learners, and they must therefore be managed with discipline, transparency and accountability,” said Maile.

The Gauteng Department of Education will ensure that affected schools and School Governing Bodies are made aware of the changes and are appropriately guided on the implications for school financial administration.

ALSO READ: Greater Germiston Taxi Association donates school shoes to 70 learners

Schools are strongly discouraged from relying on unofficial information or making assumptions about their VAT obligations. Where uncertainty exists, schools should seek guidance through the appropriate departmental and SARS channels.

The department particularly urges affected schools to review their VAT records, determine whether VAT was charged after January 1, 2026, identify any relevant enterprise assets for purposes of determining potential exit VAT, and ensure that all outstanding VAT returns and other obligations are properly addressed.

There is a limited exception for schools that qualify as welfare organisations and conduct qualifying welfare activities.

SARS indicates that such schools wishing to remain VAT-registered must apply for a VAT ruling confirming their welfare organisation status, welfare activities and the extent to which they may remain registered as VAT vendors.

“We expect our School Governing Bodies to exercise the fiduciary responsibilities entrusted to them with the highest level of care. Compliance with tax legislation forms part of responsible financial governance. Every rand available to our education system must ultimately contribute towards creating better conditions for teaching and learning,” said Maile.

The Gauteng Department of Education remains committed to strengthening financial governance, accountability and responsible management of resources throughout the provincial education system.