VAT used to be a quiet corner of school finance: fees were zero-rated, some schools registered voluntarily to reclaim input VAT, and life carried on. That ended on 1 January 2026. Under the Taxation Laws Amendment Act, 2026, all supplies made by a school - fees and everything else the school sells - are exempt from VAT. If your school is still registered for VAT, your main task now is a clean exit: final returns, deregistration and records kept in good order.
What changed on 1 January 2026
Before this year, education supplied by an approved educational institution was zero-rated. From 1 January 2026 the treatment is exemption, and the difference matters:
- Zero-rated (the old rule) carried 0% VAT. You charged parents no VAT, but a registered school could claim input VAT back on its business purchases. That reclaim is what made voluntary registration attractive.
- Exempt (the new rule) sits outside the VAT system. No VAT is charged on anything the school supplies, and no input VAT can be claimed on related costs either. Textbooks, electricity, maintenance and equipment all carry VAT the school simply absorbs.
SARS has published dedicated Schools Exiting the VAT System FAQs covering the transition. The practical consequence for most schools is simple: there is no longer an input-VAT benefit to weigh up, so the old registration decisions are moot.
One exception survives: welfare organisations carrying on certain activities can still zero-rate supplies if they hold a SARS ruling to that effect. That is a narrow carve-out - if you think it might apply to your school, raise it with your accountant before assuming anything.
Check whether your school must deregister
Where your school stands decides what happens next:
- Registered for VAT. Because every supply a school makes is now exempt, SARS expects school vendors to deregister. Apply to cancel the registration, file a final VAT201 covering the period up to deregistration, and settle any balance owing. Your accountant should also check whether adjustments arise on stock or capital goods at the point of exit.
- Not registered. Nothing to do. School supplies are exempt, so they never count towards the compulsory registration threshold. For context: that threshold was R1 million for years and rose to R2.3 million on 1 April 2026, but for schools the exemption has overtaken the question entirely.
- A separate trading entity. If a company that is not itself a school runs a commercial operation alongside the school - a standalone aftercare business, say - the exemption does not automatically follow it. Confirm the entity structure with your tax advisor rather than assuming.
What the exemption covers
The new rule sweeps broadly: all supplies made by a school are exempt. In practice that includes charges that used to need careful line-by-line analysis:
- Tuition fees, billed annually, termly or monthly.
- Enrolment and registration charges as part of joining the school.
- Tuck shop sales and school shop stock, which used to be standard-rated at 15%.
- Facility hire, transport, excursions and boarding-related charges - areas that were genuinely grey under the old rules.
The old judgement calls about which extra was "part of the education" have largely fallen away for schools themselves. The questions that remain live are about entity structure (is the supplier actually a school?) and the welfare-organisation exception - not about individual fee lines.
The exit paperwork and the records to keep
The compliance work now sits in the transition itself:
- Final returns. The VAT201 is filed for each period up to deregistration, generally by the 25th of the month after the period ends. A missed return still draws late-payment penalties, right up to the end.
- Clean cut-off invoicing. From 1 January 2026 no VAT should appear on invoices. Any invoice that wrongly charged VAT after that date needs a credit note and reissue.
- Deregistration documents. Keep the cancellation confirmation with the school's permanent compliance records.
- Five years of records. The VAT Act's five-year retention duty does not lapse when the registration does. Fee records, invoices, credit notes, reconciliations and the final returns all stay on file.
- Any rulings or correspondence. If your accountant holds a SARS ruling or written advice on any charge - historical or current - keep a copy in the finance file.
The month-end discipline you already run, with reconciliations done while the month is fresh, is what keeps the wind-down clean. A clean general ledger is a clean final return. Our month-end finance checklist covers the rhythm.
Getting your systems right
The transition shows up in the fee system first. Old VAT settings left switched on will keep producing wrong invoices long after the law changed.
- Turn off VAT flags per fee item. Tuition, tuck shop, facility hire - set them all to exempt rather than deleting the history behind them.
- Archive old VAT codes instead of removing them. Past returns and audits depend on being able to see how historic invoices were built.
- Keep statements to parents accurate. A parent who still sees a VAT line on a 2026 statement will phone the office; make sure nothing generates one.
When fees change
VAT no longer adds much complexity here, but two habits remain worth keeping:
- Say the fee is VAT-exempt when it helps. Parents comparing schools sometimes assume fee quotes exclude VAT; stating the position plainly avoids the question entirely.
- Align the fee-approval cycle with the year. Fee decisions made by your board should flow into the system before the first invoice, not after. Our start-of-year fee setup checklist walks the sequence.
And if your school is weighing annual versus monthly billing, billing structure has no tax effect either way now - but it does change how many invoices and reconciliations you manage. The monthly vs annual comparison helps you choose.
Sources & further reading
- SARS: Schools Exiting the VAT System FAQs - the exemption from 1 January 2026, deregistration and transitional questions.
- SARS: VAT page - registration, rates and current guidance, including the compulsory registration threshold.
- SARS: VAT returns and payments - filing periods, payment dates and record retention for final returns.
- ISASA: Financial Management - sound financial control systems and procedures for independent schools.
- Annual Compliance Checklist for Independent Schools - where VAT sits in your school's wider compliance calendar.
This page is general information, not legal, tax or accounting advice. The position depends on your school's circumstances, including whether it qualifies as a school and whether any welfare-organisation ruling applies. Confirm what applies to your school with your accountant or tax advisor before relying on it.
