A vendor’s VAT registration may be cancelled if certain requirements are met.
Who can cancel a VAT registration?
The cancellation of a VAT registration can be initiated by the vendor or the Commissioner. Where a vendor initiates the cancellation of the VAT registration, the vendor must apply to the Commissioner 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.
Where the Commissioner initiates a cancellation of a vendor’s VAT registration, the Commissioner must be satisfied of 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 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 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. However, the Commissioner may determine the effective date to be another date.
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 cancelling a VAT registration?
1. A vendor that intends cancelling a VAT registration must obtain, complete and submit the VAT 123e – Application for
the cancellation of registration of a person in respect of all his enterprises form.
- The VAT123e must be submitted to the SARS branch where the vendor is registered. The circumstance that gives rise to the cancellation must be clearly stated on the VAT123e or in a separate letter attached thereto.
2. The Commissioner 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 continue to charge VAT on supplies made and account for output tax and deduct any input tax up to the last day of the final tax period as was advised by the Commissioner.
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.
- Exit VAT (being the output tax on assets on hand at date of cessation) must be declared together with any other output tax and input tax for that final tax period in the that VAT return.
Top Tip: Although the VAT registration of the applicant will be cancelled, the applicant may continue to be registered for Income Tax. To access this page in different languages click on the links below: