VAT Shock Looms As Private Schools Face Deregistration And Payback Orders In South Africa

South Africa’s private schools are heading into a financial storm as a proposed change in tax law will force VAT-registered schools to deregister and repay years of VAT credits. The amendment, which kicks in on 1 January 2027, has sparked concern among school bodies, parents and education experts who fear the ripple effect will land squarely on families already stretched by rising fees and living costs.

Why The Tax Shock Is Happening

Many private schools run on tight budgets, even some of the country’s most respected independent institutions. While their core business is education, which is exempt from VAT, many supplement their income by renting sports fields, halls, accommodation or running tuckshops.

Once these activities reach R1 million in value, schools are required to register for VAT. For years, schools were then able to claim input tax on certain expenses linked to those commercial activities.

National Treasury now says those claims were never intended to be allowed. It argues that earlier advice led schools down the wrong path, and the VAT Act never permitted these deductions in the first place.

As a result, every school currently registered for VAT will have to deregister and repay what Treasury calls “erroneous” claims.

The Financial Pressure Could Hit Families Hard

Private school associations warn that the sudden change will squeeze budgets and almost certainly push fees higher. Many South African families already sacrifice holidays, cars and financial breathing room to keep their children in independent education.

Social media has been buzzing with reactions from parents who say they feel blindsided. Comments range from frustration about rising educational costs to fears that families will be priced out entirely.

Some schools also operate as non-profit organisations, often filling gaps where the state has been unable to build schools due to budget constraints. For them, Treasury’s decision feels like a double blow.

Treasury Rejects Calls To Withdraw The Proposal

Despite pushback from the education sector, Treasury has stood firm. It rejected requests to withdraw the amendment or delay it for more engagement.

However, after talks with the Independent Schools Association of Southern Africa (ISASA), the implementation date was moved from January 2026 to January 2027, giving schools an extra year to prepare.

Treasury insisted the paybacks are unavoidable. Schools will be required to settle what they owe once deregistration takes effect.

Will The Government Offer Amnesty?

Some stakeholders have proposed that government grant schools amnesty for past VAT claims. Treasury has said this is a broader government decision that neither SARS nor its tax policy unit can make on their own.

ISASA has taken the idea to the Department of Basic Education, but no response has been issued yet.

A Year Of Negotiation Ahead

Between now and the end of 2026, National Treasury and SARS will continue meeting with ISASA to find practical solutions and possibly ease the transition.

Treasury says the amendment was intended to help schools navigate a complicated VAT structure, not punish them. It has committed to working with schools struggling with the deregistration process or the administrative burden of repayments.

What It Means For Parents And Schools

For now, the reality is clear. From January 2027, VAT-registered private schools will lose the benefit of claiming VAT and will have to start repaying what they previously claimed. The knock-on effect is likely to be felt in school fees, budgets, teacher hiring and facility maintenance.

Families across South Africa are bracing for announcements from their schools, many of which are still calculating the financial implications.

With uncertainty growing, the education sector is calling for a compassionate, long-term solution that will not hit learners hardest.

{Source:Business Tech}

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