Every South African SME has to register for income tax, and depending on turnover and staffing, may also need to register for VAT, PAYE, SDL and UIF, and understanding which of these applies avoids penalties and keeps a business genuinely compliant.
Registering for tax
New businesses must register for tax with the South African Revenue Service within 21 business days of starting trading, obtaining a tax reference number used for all tax-related matters. Sole proprietors and freelancers pay income tax under their own personal tax number, while registered companies are taxed separately from the individuals who own them.
VAT registration thresholds have changed
From 1 April 2026, the compulsory VAT registration threshold rose from R1 million to R2.3 million in annual taxable supplies, the first change to this threshold in seventeen years. The voluntary registration threshold also increased, from R50,000 to R120,000, giving smaller businesses more flexibility over whether to register early. Businesses that were required to register under the old R1 million threshold should check whether they still fall above the new R2.3 million line.
PAYE, SDL and UIF for employers
Any SME with employees must register for PAYE, deducting income tax from salaries and submitting monthly returns to SARS. Employers also contribute to the Skills Development Levy to fund national training initiatives, and must register for the Unemployment Insurance Fund, making monthly contributions on behalf of staff. Accurate financial record-keeping, retained for at least five years, underpins all of these obligations and is what SARS will ask for in the event of an audit.
Frequently asked questions
How soon must a new business register for tax in South Africa?
Within 21 business days of starting business activities, obtaining a tax reference number from SARS.
What is the current compulsory VAT registration threshold?
R2.3 million in annual taxable supplies, increased from R1 million with effect from 1 April 2026.
Can a small business register for VAT voluntarily below the compulsory threshold?
Yes, the voluntary registration threshold is now R120,000, up from R50,000.
What tax obligations apply once an SME hires employees?
Registration for PAYE, the Skills Development Levy and the Unemployment Insurance Fund all become mandatory.
How long must an SME keep its financial records?
At least five years, since SARS may conduct audits and will require supporting documentation.
Tax obligation details via the South African Revenue Service.
Originally published in March 2024. Updated September 2026.
