Why cancel your VAT registration?
A vendor’s VAT registration may be cancelled if certain requirements are met.
Who can cancel a VAT?
When can you cancel VAT?
- the value of taxable supplies will be (is) less than the threshold of R1 million in any consecutive period of 12 months, or
- the vendor has ceased to carry on all enterprises eg: closed down the company or stopped trading.
- When this happens, the vendor must state the date of cessation and whether they intend to trade within the next 12 months of this date.
Where SARS initiates the cancellation of a vendor’s VAT registration, the Commissioner must be satisfied with any of the circumstances listed –
- the value of taxable supplies will be less than the compulsory or the voluntary registration threshold (whichever is applicable) in any consecutive period of 12 months;
- the vendor has failed to submit a tax return (furnish a return that is required for purposes of calculating the tax), or
- the vendor was registered under the voluntary registration category and –
- has not a fixed place of abode or business;
- does not keep proper accounting records;
- has not opened a bank account in respect of the enterprise; or
- was previously registered as under the VAT Act or Sales Tax Act and failed to perform any duty imposed under those Acts.
When does it come into effect?
When the vendor has ceased all enterprises, the cancellation normally takes effect from the last day of the tax period in which the vendor ceased to carry on all enterprises.
What is the process of cancelling a VAT registration?
1. A vendor cancelling a VAT registration must obtain, complete and submit the required documents starting with a VAT 123e form.
- The VAT123e must be submitted to the SARS branch where the vendor is registered. The reason for the cancellation must be clearly stated on the VAT123e or in a separate letter attached thereto.
2. SARS will issue a letter of acknowledgement which will also inform the vendor of the date on which the cancellation takes effect and the final tax period.
- The letter of acknowledgement may provide further instructions regarding the cancellation process.
- The vendor must still carry on charging and paying over the VAT as usual up until the last day of the final tax period as specified in the letter (See above).
3. In respect of the final tax period(as indicated by the Commissioner), the vendor must declare output tax in field 1A of that VAT return.
- This field is for the Exit VAT (being the output tax on assets on hand at the date of cessation). This must be declared together with any other output tax and input tax for that final tax period in that VAT return.
Top Tip: SARS cannot finalise your cancellation of registration as a VAT vendor until all the outstanding liabilities and obligations in terms of the VAT Act have been resolved or settled.
- For more on VAT, read this article.