Private schools across South Africa could be hit with unexpected and potentially crippling tax bills under a new government proposal aimed at overhauling how Value-Added Tax (VAT) is applied in the education sector.
According to the Draft Taxation Laws Amendment Bill, all schools will be required to deregister from VAT by 1 January 2026.
The move would apply to both public and private institutions, but experts warn private schools could suffer the most, due to their financial structures and high-value assets.
Taxable services
Currently, tuition and boarding fees are VAT-exempt, but many private schools voluntarily registered for VAT because they charge for additional taxable services like hall rentals, uniforms, catering, or sports equipment.
This registration has also allowed them to claim VAT refunds on big expenses such as building upgrades or operational costs.
However, the proposed bill would expand the VAT exemption to cover all services offered by schools.
As a result, VAT registration will no longer be permitted for any educational institution.
The most controversial aspect of the proposal is the “deemed supply” rule, which kicks in when a VAT-registered entity deregisters.
The law treats the school as if it has sold all its assets – including buildings, furniture, and equipment – at their current market value.
This triggers a VAT liability, even though no actual sale occurs.
For larger private schools, this “phantom sale” could result in tax bills running into the millions, say experts.
Treasury Offers Limited Relief
To soften the blow, the National Treasury will allow affected schools to pay the VAT liability in 12 monthly instalments, interest- and penalty-free.
But with many schools having already finalised their 2026 budgets, the timing and scale of the cost may cause severe strain.
Schools and stakeholders have been given until 12 September 2025 to comment on the proposed law.
Tax experts are encouraging institutions to respond urgently, warning that inaction could result in significant financial consequences next year.
Did you attend a public or private school in South Africa?
Let us know by leaving a comment below, or send a WhatsApp to 060 011 021 1
Subscribe to The South African website’s newsletters and follow us on WhatsApp, Facebook, X and Bluesky for the latest news.
