A vendor’s VAT registration may be cancelled by the Commissioner or the vendor, if certain requirements are met.
What are the reasons to cancel a VAT registration?
A vendor may apply for cancellation of a VAT registration where the the value of taxable supplies will be less than the compulsory registration threshold of R1 million in any consecutive period of 12 months.
The Commissioner will also cancel a VAT registration where –
- the vendor has ceased to carry on all enterprise and will not commence again within the next 12 months;
- the enterprise never actually commence or will not commence within the next 12 months;
- the vendor no longer complies with the requirements for voluntary registration;
- 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 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.
Any of a vendor’s separately registered enterprises/divisions/branches may also be cancelled if –
- the vendor applies in writing;
- the main registration is cancelled (in which case, all of the branch registrations will be cancelled); or
- it appears to the Commissioner that the duties under the VAT Act or the TA Act have not been carried out properly.
The effect of the cancellation of a branch registration is that all duties revert to the main registration. It should be noted that, where the VAT registration of the main registration is cancelled, the VAT registration of the branches are also cancelled.
With effect from 1 April 2019, the compulsory registration threshold for foreign electronic services suppliers was increased from R50 000 to R1 million. These suppliers may apply to cancel their VAT registration if the value of electronic services supplied to South African recipients did not exceed R1 million in the preceding 12-month period.
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?
- A vendor that intends cancelling a VAT registration must obtain, complete and make an appointment with a SARS branch to submit the VAT 123e – Application for the cancellation of registration of a person in respect of all his enterprises form. Use the VAT123T form to apply for the cancellation of a separately registered enterprise.
- 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.
- 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. Late payment of VAT will attract a penalty and interest.
- 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.
- 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.
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