JHB 
For years, some independent schools in South Africa have been VAT-registered, charging VAT on tuition fees and claiming input VAT on expenses. However, SARS is now set to enforce mandatory deregistration for schools, a move that will fundamentally change how these institutions manage their finances.
Why SARS is taking action
The VAT Act stipulates that educational services, specifically tuition fees, are exempt from VAT. Despite this, many schools registered for VAT under the impression that they could recover input VAT on operating costs, from textbooks to IT equipment.
SARS’s latest interpretation clarifies that schools should not have been registered for VAT in the first place. The planned deregistration drive will align practice with legislation, ensuring that schools do not improperly recover VAT.
What this means for schools
Loss of input VAT claims: Schools will no longer be able to recover VAT on operational expenses, increasing running costs.
Administrative burden: Schools must prepare to adjust accounting systems and invoicing to reflect VAT exemption.
Potential clawbacks: SARS may audit previously claimed input VAT, exposing schools to repayments, penalties, and interest.
Risks of non-compliance
Schools that ignore or delay deregistration risk facing:
SARS-imposed deregistration, with penalties
Retrospective VAT assessments
Reputational damage in dealings with parents and donors
How schools should prepare
To manage the impact, schools should:
Review VAT registration status
and prepare for compulsory deregistration.
Update budgets and forecasts
to account for increased net costs.
Communicate transparently
with governing bodies and parents about potential fee implications.
Seek our professional advice
to handle deregistration correctly and minimise exposure to clawbacks.
Final thoughts
Mandatory VAT deregistration will be a disruptive change for schools, but with proactive planning, institutions can manage the transition responsibly.
At MMS Group, we specialise in helping schools and educational organisations stay compliant and financially resilient. If your school is VAT-registered, reach out to our tax team today to prepare for deregistration and protect your institution from unnecessary penalties.