EY discusses the e-invoicing requirements for South Africa, outlining what CFOs and COOs should consider to comply with the new digital invoicing rules.

The Western Cape High Court declared Section 7 of South Africa's VAT Act unconstitutional, ruling that the Minister of Finance cannot unilaterally raise the VAT rate. The court imposed a 12‑month period before Parliament can confirm or reject any VAT rate adjustments, and the proposed 1% increase announced in the 2025 Budget Speech was withdrawn.

Finance Minister Enoch Godongwana raised South Africa’s VAT registration threshold from R1 million to R2.3 million in the 2026 budget speech, easing compliance burdens for SMBs and encouraging digital growth. The move removes a key growth constraint and signals a broader push toward digitalisation and innovation.

South Africa’s 2026 Budget lifts the VAT registration threshold from R1 million to R2.3 million, easing compliance for small businesses. The announcement also notes a 21‑cent per litre increase in fuel levies, while the threshold had remained frozen for fifteen years. The move is seen as a relief for SMEs but is framed within broader fiscal and infrastructure challenges.

South Africa’s Finance Minister announced that the VAT registration threshold will rise from R1 million to R2.3 million, and the turnover‑tax limit for very small businesses will also be lifted to R2.3 million. The change, first made in 2009, also removes the restriction on tax year‑end dates, easing compliance burdens for small firms. The adjustment aligns with inflation expectations and aims to encourage entrepreneurship.

South Africa will raise the mandatory VAT registration threshold from R1 million to R2.3 million and the voluntary threshold from R50 000 to R120 000, effective 1 April 2026. The annual turnover tax limit will also rise from R1 million to R2.3 million. These changes aim to adjust for inflation and support small businesses.

South Africa’s National Treasury is unlikely to raise the VAT rate for Budget 2026/27, citing political resistance. Instead, the focus will shift to enforcement and administrative reforms to strengthen the VAT system. A R20 bn tax increase pencilled in for 2026/27 is also expected to be reconsidered based on Sars performance.

South Africa’s tax authority, SARS, has confirmed a multi‑year plan to roll out mandatory e‑invoicing and real‑time VAT digital reporting. The phased approach will begin with system design and pilot engagement through 2026, followed by onboarding of large VAT taxpayers and priority sectors between 2026 and 2029. The reform aims to transform VAT administration into a seamless, data‑driven process where compliance is automated and risk is detected at the point of transaction.

South Africa’s 2026 Budget will focus on whether VAT can keep pace with a digitised economy rather than on rate hikes. A proposed two‑percentage‑point increase was tabled and rejected in 2025, and the Finance Minister confirmed that VAT rate increases for 2025/26 and 2026/27 have been dropped. The Treasury is examining how digital services supplied by foreign providers are taxed and whether the current framework captures modern consumption.

South African Revenue Services (SARS) is preparing to launch a mandatory e‑invoicing model, with full operational capability targeted for 2028. The initiative builds on the 2025 Draft Tax Administration Laws Amendment Bill and will include e‑invoicing, e‑reporting and a Peppol‑based interoperability framework. A phased rollout is planned for 2026‑2027, with stakeholder engagement and framework publication before the 2028 launch.

The South African Tax Court ruled that government funding is taxable when it is paid in exchange for identifiable services, regardless of the label ‘grant’. The decision focuses on commercial reality—formal agreements, deliverables, invoicing and performance oversight—rather than organisational form or public‑benefit objectives. Accounting classifications do not override VAT characterisation, underscoring the need for careful governance and early tax input.