Tax inclusive vs tax exclusive pricing: a VAT guide for SA businesses

Tax inclusive vs tax exclusive pricing comes down to whether the price you show already contains VAT. A tax-inclusive price of R1,150.00 includes R150.00 VAT at 15%; a tax-exclusive price of R1,000.00 has VAT of R150.00 added on top, so the customer still pays R1,150.00. The total is the same. What changes is what the customer sees first, how rounding works and whether you're meeting the VAT Act's rules on quoted prices.

This guide covers the formulas, the legal position in South Africa as of September 2026, and how to choose a default for your business.

The formulas

South Africa's standard VAT rate is 15%, as confirmed by SARS (the proposed 2025 increase was withdrawn).

Tax exclusive to inclusive:

• VAT = exclusive price × 15%
• Inclusive price = exclusive price × 1.15

Tax inclusive to exclusive:

• VAT = inclusive price × 15 ÷ 115 (the "tax fraction")
• Exclusive price = inclusive price ÷ 1.15

A common mistake is to take 15% of the inclusive price to find the VAT. On R1,150.00 that gives R172.50, which is wrong. The VAT in a R1,150.00 inclusive price is R150.00.

Quick reference table

Notice the R99.99 row: when you start with a round inclusive price, the exclusive price and VAT will usually have awkward cents. That's normal.

What the VAT Act says about quoting prices

Section 65 of the VAT Act deals with prices advertised or quoted by a vendor. In short, if you're a registered VAT vendor, prices you advertise or quote for taxable supplies must include VAT, or you must show the exclusive price, the VAT and the inclusive price together. Commentators such as Cliffe Dekker Hofmeyr note that where both prices are shown, they should have equal prominence, and that failing to comply can be an offence.

SARS can approve other ways of displaying prices. For example, Binding General Ruling 28 sets out an arrangement for certain foreign electronic services suppliers. Rulings get updated, so check the current version on the SARS website and speak to your tax practitioner if you're unsure how it applies to you.

The practical takeaway: a price list that says "R1,000 pm" with a tiny "excl. VAT" footnote is risky. Either show R1,150 pm, or show R1,000 excl. VAT, R150 VAT and R1,150 incl. VAT with the same weight.

If you aren't registered for VAT, you don't charge VAT at all. Your prices are simply prices. Remember the compulsory registration threshold rose to R2.3 million of taxable supplies in 12 months from 1 April 2026, so check where you stand as you grow.

Rounding: per line or per invoice?

When you work tax-exclusive, you have to decide whether to calculate VAT on each line and add it up, or on the invoice total. The two can differ by a cent or two.

Illustrative example: three lines at R10.05 each, exclusive.

• Per line: R10.05 × 15% = R1.5075, rounded to R1.51. Three lines = R4.53 VAT.
• On the total: R30.15 × 15% = R4.5225, rounded to R4.52 VAT.

Neither is "wrong", but you must be consistent, and your invoice total must equal the sum of what's shown. If you sync invoices to an accounting system, make sure both use the same rounding approach or you'll get one-cent differences in reconciliation.

When you work tax-inclusive, rounding is simpler for the customer: the price they saw is the price they pay, and the VAT is backed out of the total.

Which should you use?

Whichever you choose for display, your tax invoice must still show the VAT correctly. For full tax invoices over R5,000 that means showing the VAT charged, among other details. See VAT invoice requirements in South Africa for the full list.

Mixing zero-rated and exempt items

Not every line carries 15%. Exports and certain basic foodstuffs are zero-rated (0% VAT but still taxable supplies), and some supplies such as certain financial services are exempt. On an invoice with mixed items, set the VAT treatment per line rather than applying 15% to the whole total. Your invoicing tool should let you mark a product as zero-rated or exempt.

Pricing subscriptions and discounts

Two traps come up often with recurring billing:

1. Discounts on inclusive prices. A 10% coupon on a R1,150.00 inclusive plan gives R1,035.00 inclusive, of which R135.00 is VAT (not the original R150.00). Make sure the VAT is recalculated on the discounted amount and the invoice shows the discounted figures. Our guide to subscription discount codes covers this in more detail.
2. Changing the display basis mid-contract. If a customer signed up at "R500 excl. VAT" and you switch your price list to inclusive, don't let the system recalculate them to R500 inclusive. Their effective price would drop. Migrate them explicitly.

How CentraPoint helps

CentraPoint's invoicing is VAT-aware: you choose whether prices are tax inclusive or exclusive, and invoices, receipts and PDF documents show the VAT breakdown accordingly. You can send invoices with a pay-by-link, record offline EFT or cash payments against them, and bill subscription plans and coupons from the same system, which keeps amounts consistent from quote to receipt. CentraPoint also offers accounting integrations with Sage, Xero, QuickBooks and Zoho Books; Pastel export. Details are in the invoices documentation.

Frequently asked questions

How do I calculate VAT from a VAT-inclusive price?

Multiply the inclusive price by 15 and divide by 115. For R1,150.00 that gives R150.00 VAT and an exclusive price of R1,000.00.

Can I advertise prices excluding VAT in South Africa?

If you're a VAT vendor, section 65 of the VAT Act generally requires advertised or quoted prices to include VAT, or to show the exclusive price, VAT and inclusive price together. Check the current rules with SARS or your tax practitioner.

Is it better to invoice businesses tax exclusive?

Many B2B invoices show exclusive line amounts with VAT added at the bottom, because business buyers claim the VAT back. Both approaches are valid if the tax invoice shows VAT correctly.

Why is my VAT total a cent out?

It's usually rounding: calculating VAT per line and on the invoice total can differ by a cent or two. Pick one method and use it consistently across your billing and accounting systems.