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By Levy Masiteng
Gauteng MEC for Education, Sport, Arts, Culture and Recreation Lebogang Maile has told affected schools to get their VAT affairs in order, saying that changes to the tax treatment of schools require them to review their records, deal with outstanding returns and apply for deregistration where necessary.
The changes took effect on 1 January 2026, when supplies made by schools registered under the South African Schools Act became exempt from Value-Added Tax.
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As a result, most affected schools no longer conduct an “enterprise” for VAT purposes and are required to exit the VAT system.
However, the Gauteng Department of Education said deregistration was not automatic, and schools that remain registered as VAT vendors must apply to the South African Revenue Service (SARS) to be deregistered.
“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,” Maile said.
The department said schools must continue submitting the required VAT returns while their registrations remain active, with those returns generally expected to be nil unless adjustments are required.
Schools that charged VAT on supplies on or after 1 January 2026 must declare that VAT in the relevant VAT201 return. If a school later issues a credit note and refunds the VAT, the relevant adjustment may be made in line with SARS requirements.
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Affected schools must also assess whether they face so-called “exit VAT”.
Under 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 stopped conducting that enterprise.
These could include certain trading stock, equipment, furniture, improvements to property and other enterprise assets where input VAT had previously been deducted.
SARS determines the position with reference to assets held immediately before schools ceased conducting an enterprise, effectively as at 31 December 2025.
Not every asset will attract exit VAT. Exclusions include 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.
Schools that are liable for exit VAT will only be required to pay it from 1 January 2027 and may settle 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 exit VAT where payment is made through the prescribed 12-month instalment arrangement from 1 January 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,” Maile said.
There is a limited exception for schools that qualify as welfare organisations and conduct qualifying welfare activities.
Those wishing to remain VAT registered must apply to SARS for a VAT ruling confirming their welfare organisation status, welfare activities and the extent to which they may remain registered as VAT vendors.
The department urged affected schools to review their VAT records, determine whether VAT was charged after 1 January 2026, identify enterprise assets that could give rise to exit VAT and ensure all outstanding returns and other obligations are addressed.
It also warned schools against relying on unofficial information or making assumptions about their obligations, saying they should seek guidance from the department and SARS where there is uncertainty.
“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,” Maile said.
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