Private schools in South Africa face looming tax blow

A new government proposal could saddle private schools across South Africa with unexpected and potentially crippling tax bills.

Private schools across South Africa could be hit with unexpected and potentially crippling tax bills under a new government proposal. Image: Bishops

The government has proposed changes to how Value-Added Tax (VAT) applies in the education sector, potentially leaving private schools across South Africa facing unexpected and crippling tax bills.

The Draft Taxation Laws Amendment Bill requires all schools to deregister from VAT by 1 January 2026.

Although the move targets both public and private institutions, experts warn private schools will bear the heaviest impact because of their financial structures and high-value assets.

Taxable services

At present, schools do not pay VAT on tuition and boarding fees, but many private schools voluntarily registered because they charge for taxable extras such as hall rentals, uniforms, catering, or sports equipment.

This registration also enabled them to claim VAT refunds on major expenses like building upgrades or operational costs.

The proposed bill, however, expands VAT exemption to all services schools provide.

As a result, no educational institution will be allowed to remain VAT-registered.

The most controversial part of the proposal introduces the “deemed supply” rule, which applies 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.

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