A vendor’s VAT registration may be cancelled if certain requirements are met. The cancellation can be initiated either, by the vendor or the Commissioner.
Who can cancel VAT registration?
A vendor may apply to the Commissioner to cancel its VAT registration if -
- the value of taxable supplies will be less than the compulsory registration threshold of R1 million in any consecutive period of 12 months, or
- the vendor has ceased to carry on all enterprises.
If the vendor has ceased to carry on all enterprises, the vendor must also state the date of cessation of the enterprises and whether it intends to carry on any enterprise within 12 months from date of cessation.
The Commissioner may cancel the VAT registration of a vendor if -
- the value of taxable supplies will be less than the voluntary registration threshold of R50 000 in any consecutive period of 12 months; or
- the vendor was registered under the voluntary registration category and -
- has not 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.
In the case where 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. In any other case, the Commissioner will decide the date of cancellation and final tax period for which a vendor is required to submit its 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.
What is the process of cancellation of VAT registration?
1) Ordinary cancellation process
- The application form for cancellation of registration must be submitted
to the SARS branch where the vendor is registered and the circumstances under which the cancellation is requested must be clearly stated on the form or in a separate letter
2. SARS responds by a letter of Acknowledgement also advising on final tax periods
The letter of acknowledgement from SARS will provide further instructions regarding the cancellation process. The vendor must continue to charge and declare VAT on supplies made and deduct any input tax up to the last day of final tax period as will be advised by SARS.
3. Applicant declares Output tax in field 1A of final return
- Exit VAT must be declared together with any other VAT due or refundable for that final tax period in the final VAT return.
4. Applicant’s VAT registration is cancelled
Top Tip: Although the VAT registration of the applicant will be cancelled, the applicant may continue to be registered for Income Tax.
2) Cancellation of registration as VAT vendor and participate in Turnover Tax
2. Successful applicants for Turnover Tax get notified
3. Letter of acknowledgement will be sent with further instructions regarding the process of cancellation of registration as a VAT vendor.
4. Declare Output tax in field 1A on final return
5. Pay exit VAT
The process outlined above is for situations where the vendor requests to deregister for VAT but still continue operating and thus be liable for Turnover Tax.
The TT01 form must be submitted to SARS before the commencement of the relevant year of assessment i.e. the 1st of March or by a specified date as the Commissioner may allow.
The vendor must continue to charge and declare VAT on supplies made until the last day of final tax period as advised on the letter of acknowledgement from SARS.
For further information, visit your nearest branch and/or call the SARS Contact Centre at 0800 00 7277. You can also read more on VAT from the VAT 404 Guide for Vendors .