With SARS increasing the VAT registration threshold from R1million to R2.3million from 01 April 2026, most vendors are asking themselves whether they can now deregister from VAT.
Although this may be a logical and attractive step, it could be a costly tax event.
Built into the VAT Act are provisions that can be triggered once a VAT vendor decides to exit the VAT system – SARS will deem Output VAT on certain goods or assets still forming part of the taxpayer’s business on deregistration.
Where Input VAT was previously claimed on these assets, a VAT vendor would now need to pay Output VAT (15% standard rate) on the value of these assets (even though no actual ‘sale’ of assets or rights/ goods have occurred and no cash has been received by the enterprise).
Deregistration for VAT may result in an unexpected liability and payment to SARS – approach this with caution.
Please contact Juanita Roman or Fatima Bapukee should you wish to consider this for your business, before you make a decision to deregister.
