VAT Shock for Schools: Proposed VAT Amendment Could Break Budgets

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South Africa’s private and VAT-registered schools are facing a financial curveball. Under the latest draft of the 2025 Taxation Laws Amendment Bill (TLAB), schools currently registered for VAT may soon be forced to deregister by 1 January 2026. And the consequences? They’re anything but academic.

What’s changing?

Right now, some schools charge VAT on "commercial" activities — think school uniforms, facility rentals, tuck shop sales — and in return, they can claim back VAT on things like floodlights, sports fields, and even hostel renovations.

The new bill proposes to remove “school” and “school fees” from the VAT Act’s exemption conditions. That means ALL school-related supplies, whether linked to fees or not, would become VAT exempt. While this may sound good, it is not quite.

Here’s the catch: Exit Tax

Schools that deregister from VAT must pay back all the VAT they've claimed over the years on capital projects. This could include:

• A portion of VAT reclaimed for a school swimming pool built in 2018

• VAT on solar panels powering the classrooms

• Input tax on uniforms sold at the school shop

This “exit VAT” bill could run into millions of rands, especially for older or more affluent schools.

For example, if School A spent R5 million upgrading sports facilities over the past decade and claimed VAT on those expenses, deregistration could force them to pay back roughly R750,000 in one go. This could have a major impact on the budget of the school.

Government’s small relief

Schools may request to pay this back over 12 months — or longer if SARS agrees. But for schools that have already locked in their 2026 budgets, it could spell serious cash flow trouble.

What does this mean for parents?

How will schools recover this unexpected expense? Brace yourselves. Higher operating costs often translate into school fee hikes.

Public comments open

Schools, parents, and stakeholders have until 12 September 2025 to submit comments on the bill. Let us know your input by 31 August 2025 via email to technical@myciba.org. Let us make a difference together.

Article source: Moneyweb