VAT Deregistration in South Africa: When and How to Cancel Your VAT Number

Falling below the VAT threshold doesn't cancel your registration. You stay a VAT vendor, with every duty that comes with it, until SARS approves a cancellation. This guide covers when you can apply, whether you should, the exact steps, and the final return, which catches out more vendors than anything else.

When you can deregister

SARS says a vendor may apply in writing to cancel a VAT registration where the value of taxable supplies will be less than the compulsory registration threshold of R2.3 million in any consecutive period of 12 months. That threshold was R1 million until the 2026 Budget raised it. The Budget FAQ on SARS's site says the new figure applies from 1 April 2026, and the voluntary registration threshold went from R50,000 to R120,000 on the same date.

SARS can also cancel a registration on its own initiative. Its grounds include a vendor who has stopped trading and won't start again within 12 months, an enterprise that never started, a vendor who no longer meets the requirements for registration, and a vendor who has failed to file a required return.

Existing vendors get one quirk worth knowing. If you're registered and your turnover sits somewhere between R120,000 and R2.3 million, SARS does not cancel you automatically. You can choose to cancel, but nothing happens unless you apply. If your supplies in the preceding 12 months were under R120,000 and you registered voluntarily, SARS will notify you of its intention to cancel, and you can object on an ADR1 form within 80 business days of the notice. When SARS last updated that FAQ in August, it said the amendments had not yet been promulgated, but it was already applying the new figures to applications.

Should you deregister at all?

Being under the threshold doesn't make deregistering the right call. It depends mostly on who your clients are.

If most of your clients are VAT vendors themselves, the VAT you charge is a wash to them, because they claim it back. Staying registered costs them nothing, and it lets you keep claiming input VAT on your own expenses. If most of your clients are individuals or businesses that aren't registered, the VAT is a real 15% on top of what they pay, and you may price yourself out of work you could win as a non-vendor.

Your own expenses matter too. A business that buys a lot of stock, tools or equipment claims plenty of input VAT and gives that up on deregistering. A consultant whose costs are a laptop and a phone contract gives up very little.

Then there's the exit cost, covered below. Deregistering can trigger a VAT bill on assets you still hold, and for a business with stock or equipment it can outweigh the savings. Our VAT registration guide covers the trade-off from the other direction.

How to apply: step by step

1. Confirm you qualify: turnover below R2.3 million and staying there, or the business has genuinely stopped trading.
2. Complete the VAT123e form, SARS's application to cancel the registration of a person in respect of all their enterprises. Say clearly why you're applying, either on the form or in a letter attached to it.
3. Settle every outstanding return and amount owing first. SARS says it can't finalise a cancellation until all outstanding liabilities and obligations under the VAT Act are resolved.
4. Email the cancellation request, as SARS allows, and book a virtual appointment on SARS eBooking. SARS's page tells you to choose "Other" as the reason category and "VAT and PAYE registration/deregistration" as the reason for the appointment. The application must be submitted to the SARS branch where you're registered.
5. Keep filing and paying on time while you wait. After SARS approves, it tells you the effective date and your final tax period, and you file a last VAT201 for that period. Our VAT201 guide covers the filing.

SARS says a cancellation normally takes effect from the last day of the tax period in which you stopped carrying on all your enterprises, though it can set a different date. The notice it sends you states the date that applies to you.

Your final VAT return

You must keep charging VAT and account for output and input tax up to the last day of the final tax period SARS gives you. Late payment attracts penalties and interest as usual.

The final return also carries a charge many vendors don't expect, often called exit VAT. When you stop being a vendor, SARS treats you as having supplied the goods and rights you still hold, such as trading stock and equipment. You pay output tax on the lesser of what the assets cost you and their open market value. Only enterprise assets count. Assets used wholly for exempt or other non-taxable activities are left out, and so are goods on which you were never allowed an input tax claim, such as entertainment and most motor cars.

In broad terms, exit VAT reverses input VAT you claimed on things you still own. If you claimed input VAT on tools and shelving and you still use them on the day you deregister, expect to pay some of that VAT back. Ask a tax practitioner to work out the figure before you apply. It can change whether deregistering is worth doing.

The final return has an upside too. If you didn't claim input tax you were entitled to, you can claim it in that last return, provided you have the documents and the claim falls within five years of the date you became entitled. After you submit the final return, no more deductions are allowed.

What changes once you're deregistered

• You stop charging VAT on what you sell from the effective cancellation date.
• Your invoices lose the VAT number and the VAT line, and the heading should change to "Invoice". Our invoice guide covers what a non-VAT invoice needs.
• You can no longer claim input VAT on business expenses.
• You keep your VAT records for five years, and SARS can still ask for them.

Registering again later

Nothing stops you registering again. Registration becomes compulsory once your taxable supplies exceed, or are likely to exceed, R2.3 million in any 12-month period, and SARS says you must apply within 21 business days from the date you cross or will cross that amount. You can also register voluntarily once your supplies pass R120,000. You'd go through the same process as a first-time registration, covered in our VAT registration guide.

If you're weighing up deregistration, put numbers on it before you apply. Set the input VAT you'd stop claiming and the exit VAT on what you hold against what your clients would pay without VAT on top.