VAT on guesthouses, B&Bs and holiday lets
When a South African guesthouse, B&B or holiday let becomes a VAT enterprise, how stays of more than 28 days are taxed, and how registration follows.
By Achekam · · 5 min read · For Running a business businesses in South Africa
Someone turns the flat behind the house into a holiday let. A couple opens three rooms of a family home as a B&B. A farm adds a few self-catering cottages for weekenders. At first nobody thinks of VAT; it feels like a side income, not a business.
South African VAT sees it differently, and has a rule written specifically for accommodation businesses. That rule sets the point at which letting rooms becomes an "enterprise" for VAT, which is the first step towards having to register. It also has a special treatment for long stays. This article explains how commercial accommodation differs from letting a home, where the line sits, how stays of more than 28 days are taxed, and how a guesthouse moves from enterprise to registration.
Commercial accommodation is not letting a home
SARS's VAT 404 guide says no VAT is levied on the letting of a dwelling under a lease agreement, and that this also applies to employee housing supplied by an employer, but not to commercial accommodation.
That is the dividing line. A tenant who rents a flat under a lease, to live in as their home, is in the exempt world of residential letting. A guest who books a room for a few nights at a guesthouse, B&B or holiday let is receiving commercial accommodation, which is a taxable supply. The same building can be either, depending on how it is let. The residential side is covered in VAT on residential letting.
The R120 000 enterprise threshold
Commercial accommodation is the one activity where SARS sets a value test before the activity counts as an enterprise. SARS says a person supplying commercial accommodation is not carrying on an enterprise for VAT where the total value of those supplies does not exceed R120 000 in any consecutive 12 months.
SARS's VAT 409 guide for fixed property and construction puts it the other way round: a person supplying commercial accommodation is only regarded as carrying on an enterprise if taxable supplies of commercial accommodation exceed R120 000 in a 12-month period. It adds that this is the only activity that must exceed a threshold to be an enterprise. The VAT 409 issue quoted is issue 7, with operational information up to date as at 5 October 2023; its other registration figures predate the April 2026 changes, so use it for the principle, not for current thresholds.
Two words do the work:
- "Any consecutive 12 months": the test rolls. It is not the tax year or the calendar year. A strong holiday season can tip a small let over the line in a run of months that straddles two years.
- "Total value": all your commercial accommodation counts together, so three rooms and a cottage are one figure, not four.
Stays of more than 28 days
Some guests stay for months: a contractor on a long project, a visiting academic, a family between houses. SARS's guide to completing the VAT201 return has a special treatment for them.
It says that for commercial accommodation supplied for a full period of more than 28 days, the VAT-exclusive amount goes in field 5 and VAT is calculated on 60% of that amount. There is a condition: the charge must be an all-inclusive charge that includes domestic goods and services, such as cleaning and linen. If it is not all-inclusive, the amount goes in field 1 instead, taxed in the ordinary way.
A worked example in words: a guesthouse lets a room to a contractor for three months at a single monthly rate that includes breakfast, cleaning and laundry. That is a full period of more than 28 days at an all-inclusive charge, so the amount goes in field 5 and VAT is worked out on 60% of it. If the guesthouse instead charged for the room and billed cleaning separately, the special treatment would not apply.
From enterprise to registration
Being an enterprise does not by itself oblige you to register. It brings you into the system; the registration tests then apply.
- Compulsory registration. SARS's VAT page says that, as announced in the 2026 Budget Speech, the compulsory registration threshold increased from R1 million to R2.3 million with effect from 1 April 2026.
- Voluntary registration. SARS says a person may register voluntarily if taxable supplies are below R2.3 million but have, under certain circumstances, exceeded R120 000 in the past 12 months. SARS notes that the Voluntary Registration Regulation has not yet been updated, but that it is administering applications on the increased threshold from 1 April 2026.
So a guesthouse that has crossed the enterprise line but stays below the compulsory threshold is choosing whether to register, not being forced to. The trade-off is the usual one: registration lets you claim input tax on renovations, furniture and supplies, but adds VAT to guests' bills. The compulsory test in detail is covered in the compulsory VAT registration threshold.
These thresholds are as SARS published them at the time of writing. SARS's register for VAT page explains who may and who must register, and what counts as an enterprise.
Invoicing stays from Achekam once you hold a VAT number
Once registered, every stay needs a proper tax invoice. In Achekam, a business enters its VAT registration number in Settings under Firm Profile, and documents made by the server print it and are titled Tax Invoice only when a VAT number is set. Before registration, the same documents go out without that title, which is correct for a business that is not a vendor.
A business creates customer invoices as drafts it can change or delete. Issuing one takes the next number in its sequence and posts it to the ledger as debtors, sales and output VAT, so each stay reaches your books in the same step it is billed.
One limit matters for long stays. A South African business sets each invoice line's VAT to 15% or 0%, and the invoice screen does not tell zero-rated and exempt apart. There is no line setting for the long-stay treatment, where VAT is worked out on 60% of the charge. Agree with your accountant how a stay of more than 28 days should be invoiced and how it is carried into field 5 of the return, and keep a list of those stays for each VAT period.
Before the next booking season
Add up your commercial accommodation over the last 12 months and keep a running total each month. Check whether your long-stay rates are genuinely all-inclusive. And if you are close to the enterprise line, decide in advance whether you will register voluntarily, rather than finding out after a busy season that the choice has already been made for you.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
