VAT Deregistration: Know about the VAT Exit Charge

Updated on May 9, 2022

The VAT Act mandates that anyone who has or expects to have taxable supplies in excess of R1 million in a 12-month period must register for VAT. If a person’s supplies have run low, they can also voluntarily register.

in a 12-month period, have exceeded or are likely to surpass R50,000. A

Among the many reasons a person can choose to voluntarily register is to ensure

Input VAT claims.

The vendor may no longer be able to register a person if they no longer match the standards.

Request a deregistration from SARS. Deregistration is also possible if a person no longer carries

vendor must notify SARS, who will revoke the contract if it is for a business.

Registration of the seller is needed. It’s worth remembering that when a vendor is no longer a vendor, the vendor is no longer a vendor.

all of its VAT obligations that accrued while he was a vendor will remain his responsibility.

As a result, ceasing to be a vendor does not release you from any existing commitments.

incurred as a result of the VAT Regulations.

In order to deregister, a seller must undertake certain steps, such as the

submittal of the VAT123e form to South Africa Revenue Services The process of being deregistered as a

The vendor should be informed of the immediate VAT implications.

Deregistration’s ramifications are frequently ignored, despite the fact that they could be considerable.

considerations such as how much money the company has to work with

etc. Depending on the current worth of the vendor’s corporate assets

quantity of output VAT must be reported and paid to SARS as a result of deregistration

may have a substantial impact on the vendor’s cash flow.

It is stated in Section 8(2) of the VAT Act that when someone ceases to be a vendor, the items and rights owned by him that were part of his firm on the date of deregistration are considered to have been sold (subject to certain exceptions). A vendor must account for output VAT on any goods or rights owned on the date of deregistration, if he chooses to do so. This tax is calculated by multiplying the VAT inclusive cost of all goods and rights owned by 15/115, which is equal to the market worth of all goods and rights owned on the date he ceases to be vendor.
Creditors with balances older than 12 months are also subject to the departure VAT fee. As soon as a vendor is deregistered, he or she has to pay back whatever input tax he or she claimed within 12 months prior to the deregistration date. Vendors must account for VAT on unpaid debts as soon as they cease to be vendors. Those who are not in the process of deregistration may also benefit from a clause that applies to all vendors. Output VAT must be accounted for on any unpaid debts to creditors that are not paid within 12 months of the due date.
In terms of the due date, there is some relief, but it’s a little one. A vendor who deregisters because the total value of taxable supplies in the preceding year did not surpass the voluntary registration level of R50 000 or the compulsory registration threshold of R1 million must pay the VAT within six months of deregistration to SARS.
Anyone considering deregistering their business should be informed of and cognizant of the potential VAT ramifications of doing so. An unregistered vendor must assess the benefits and drawbacks of doing so before making a final decision. Deregistration must also be timed carefully to account for the impact on cashflow and other factors that may arise. In order to avoid paying an exit charge on creditors’ balances, it is recommended to minimise or pay off the creditors prior to deregistration. As a result, in order to avoid unpleasant surprises after deregistration, careful preparation should be made in advance.