Updated on May 14, 2022
If specific conditions are met, the Commissioner or the vendor can cancel a vendor’s VAT registration.
What are the reasons to cancel a VAT registration?
In the event that a vendor’s taxable supply fall below the R1 million level in any successive 12-month period, the vendor can ask to have their VAT registration cancelled.
A VAT registration can also be revoked by the Commissioner in the event that–
If the vendor is no longer engaged in any kind of business, or if it has not been engaged in any kind of business at all for the past 12 months, the vendor is no longer eligible to register as a vendor for tax purposes, or the vendor was registered as a vendor but has not established an abode in which to conduct business and has not submitted an annual return for tax purposes.
Cancellation typically takes effect on the last day in the tax period that the vendor stopped operating all businesses, unless otherwise specified. In any event, the Commissioner has the power to set a different effective date.
An independent company, division, or branch of a vendor may be cancelled if the seller fails to comply with –
Vendor requests cancellation in writing; main registration is cancelled (in which case all branch registrations are cancelled); or the Commissioner believes that the duties imposed by the VAT or TA Acts were not properly performed.
This means that all of the company’s obligations are transferred to the parent company’s registration. Notably, the cancellation of the main VAT registration also results in the cancellation of all branch VAT registrations.
For international electronic service providers, the mandatory registration level has been increased from R50 000 to R1 million effective April 1, 2019. If the value of electronic services delivered to South African recipients did not reach R1 million in the prior 12-month period, these suppliers may apply to revoke their VAT registration.
Your VAT vendor registration can’t be cancelled until all outstanding liabilities and obligations are handled or cleared by SARS, the South African Revenue Services (SARS).
What is the process of cancelling a VAT registration?
The VAT 123e – Application for the cancellation of registration of a person in respect of all his enterprises form must be obtained, completed, and submitted to a SARS branch by a vendor who desires to cancel a VAT registration. If you want to get rid of a separate business, you need to fill out the VAT123T form.
If the merchant is registered with SARS, they must submit the VAT123e to the SARS branch closest to them. On the VAT123e or in a separate letter attached to it, the reason for the cancellation must be specified.
In addition to notifying the vendor of the effective date of the cancellation and the end of the tax period, the Commissioner will send an acceptance letter. Interest and penalties will be imposed if VAT is not paid on time.
The cancellation procedure may be explained in more detail in the letter of acknowledgement. After the last day of the final tax period, the vendor must continue to charge VAT on all supplies made and account for output tax and deduct any input tax.
Output tax must be reported on the final VAT return in field 1A according to the Commissioner’s instructions.
Exit VAT must be included in the VAT return along with any other output and input taxes for the final tax period, as it is the output tax on assets held at the time of cessation.
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