South African private schools face serious SARS change
A key tax change proposed in the 2025 tax laws could significantly shake things up for private schools in South Africa.
Many people in South Africa choose to enrol their children in independent or private schools for various reasons, even though private school fees are significantly higher than those of public schools.
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Earlier this year, News24 reported that South Africa's inflation rate as of September 2025 was 3.4%, but private school fees are expected to rise by more than the inflation rate.
While it may seem that private schools are pocketing massive amounts of cash, these institutions are now being forced to make tax changes.
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Many schools are currently reclaiming VAT on expenses and commercial activities, as they primarily run educational activities that are exempt from VAT.
Those with the means often rent out sports fields or halls, run tuckshops, or provide accommodation to supplement their income.
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When the value of these activities exceeds R1 million, schools are required to register for VAT. As a result, schools are entitled to claim a portion of their expenses as VAT input credits.
According to BusinessTech, the proposed changes to the 2025 tax laws aim to reverse the "distorted" VAT claims by schools that were never intended to be possible
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The National Treasury has announced that, as of 1 January 2027, private schools registered for VAT must be deregistered and start repaying SARS any money from previous VAT claims.
The new amendments result in schools no longer being able to claim VAT, having to pay the costs themselves, and any past claims.
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Naturally, school bodies and representative groups have warned that this will add immense financial strain on these schools and may lead to even higher fees.
This then shifts the burden onto families, many of whom are already struggling to afford independent education for their children.
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BusinessTech reports that "some of these schools even operate on a not-for-profit basis and set up schools in areas where the Department of Basic Education have been unable to do so due to funding issues."
The Treasury has also stated, "due to past incorrect advice, these schools claimed input tax that was not allowed in terms of the provisions of the VAT Act."
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Following engagements with stakeholders, including the Independent Schools Association of Southern Africa (ISASA), the National Treasury conceded to push back the implementation of the changes.
These changes were initially scheduled to take effect on January 1, 2026, but have been delayed until January 2027.
While this has provided some relief, the National Treasury has made it clear that these changes will be implemented and cannot be avoided.
In the interim, the parties will continue to meet and attempt to find a resolution to the difficulty being faced by some of the schools.
The department has also stated that proposals have been submitted to the government to grant schools amnesty for the input taxes that were claimed and that schools not be requested to repay the amount.
ISASA has taken the proposal to the Department of Basic Education. A response is still pending.
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