Updated for 2026 Thresholds

How to Deregister for VAT

Navigate the SARS VAT123e process, understand the financial impact of "Exit VAT", and learn how SARS processing timelines work under the modern service framework.

Written by Heinrich Grove, SAIPA (SA) SARS Registered Tax Practitioner Updated August 2026

Video Summary: The "Great VAT Exit"

In this 12-minute deep dive, Heinrich Grove explains why 2026 is a massive transition year for VAT vendors.

  • New 2026 Thresholds: Compulsory registration moves to R2.3 Million; Voluntary moves to R120,000.
  • The 21-Day Rule: If you cease trading, you must notify SARS within 21 days—don't just file "Nil" returns.
  • Processing Timelines: Official 21-day target vs audit delays. You MUST keep charging VAT until SARS confirms the exit.
  • Payment Relief: SARS may allow you to pay your "Exit VAT" liability over 6 months to manage cash flow.

Note: SARS may compulsory deregister you if they see your turnover is consistently too low. Be prepared for a verification call!

A Critical Shift: The New Thresholds

Effective from 1 April 2026, the compulsory VAT threshold is R2.3 million (previously R1 million), and the voluntary registration threshold is R120,000. If your sales consistently fall below the R2.3 million mark, you might decide that the administrative burden of bi-monthly VAT returns is no longer worth it, making deregistration the best financial choice.

The Hidden Cost: "Exit VAT"

Deregistering from VAT is not as simple as flipping a switch. When you cancel your VAT number, SARS essentially treats it as if you sold all your business assets and stock to yourself. This is known as a Deemed Disposal (in terms of Section 8(2) of the Value-Added Tax Act, 1991 (Act No. 89 of 1991)).

Warning: Calculate Before You Cancel

If you deregister, you will be hit with an "Exit VAT" bill on your final return. You must pay 15% Output VAT to SARS on:

  • Assets & Equipment: Any business assets (vehicles, laptops, machinery) where you previously claimed Input VAT. You pay VAT based on the lower of the original cost or the current open market value.
  • Trading Stock: All inventory and stock sitting on your shelves on the date of cancellation.
Category Asset Description Cost / Market Value Deemed Disposal (15% Output VAT)
Trading Stock Remaining warehouse stock R100,000 R15,000
Fixed Assets Office equipment & laptops R50,000 R7,500
Total Final Exit VAT Liability to declare on final VAT201: R22,500

Understanding SARS Processing Timelines

While the official SARS Service Charter benchmark for deregistration is 21 business days, real-world turnaround times depend heavily on your tax compliance profile. Applications flagged for manual risk reviews, outstanding returns, or audit verifications can still experience extended delays.

Crucial Rule: You are legally regarded as a VAT vendor until SARS officially notifies you of your deregistration date. You MUST continue charging VAT and submitting your VAT201 returns during this entire process.

The Timeline Trap: When do I stop charging VAT?

This is the most common point of confusion for business owners. Let's look at a practical example:

Scenario: You submit your VAT123e form on 1 May 2026, requesting that date as your cancellation.

  • Do I stop charging VAT on 1 May? No! You must continue to charge VAT on all taxable supplies until officially canceled.
  • Do I stop filing returns? No! You must keep filing your VAT201 returns until you receive formal notice.
  • When do I actually stop? Only when SARS sends you a formal notice of cancellation confirming your official deregistration date.
  • How is the Exit VAT calculated? The "Deemed Disposal" (Exit VAT) is calculated based on the assets and stock you hold on the day immediately before the official deregistration date chosen by SARS.

Bookkeeping Prep: The "Two-Phase" Rule

Because of processing timelines and verification stages, your bookkeeping prep happens in two distinct phases: an initial estimate for the VAT123e application, and a final calculation on the exact date SARS cancels your registration.

1. Stock Take (Done Twice)

Conduct an initial physical count for your application. Later, you must do a final stock take on the exact day before your official cancellation date to declare on your final VAT201 return.

2. Asset Register

Identify every asset where Input VAT was claimed. You need an initial estimate now, but the actual open market value must be recalculated on your final deregistration date.

3. Bank Statements

SARS typically requires 12 months of bank statements leading up to your application date to verify your turnover has dropped below the threshold. Ensure these are ready on day one.

The 4-Step Deregistration Process

Ensure 100% Compliance

SARS will reject a cancellation if you have outstanding VAT201s, missing IT14s, or any unpaid debt. Your profile must be completely clean first.

Prepare Form VAT123e

Complete the VAT123e form. You must state the exact reason for cancellation and the specific date you ceased trading or fell below the threshold.

VAT123e Submission Checklist

Submission & Verification

Submit via a SARS appointment (at major regional branches like Cape Town, Megawatt Park Johannesburg, or Durban) or through a Tax Practitioner's portal. Crucial: Be fully prepared for SARS to reach out and inquire about your submission. This is why working with a VAT specialist is so important—they manage these regional inquiries and verification calls on your behalf to ensure your application isn't dismissed over a simple misunderstanding.

The Final Return

Once approved by SARS, you must submit a final VAT201 return. This includes your normal trading plus the output tax on your remaining assets and stock.

Template: SARS Cancellation Request Letter

Copy & Edit
TO: South African Revenue Service (SARS) DATE: [Insert Date] SUBJECT: Request for VAT Deregistration – [Company Name] (VAT No: [VAT Number]) Dear SARS VAT Assessment Team, We hereby apply for the cancellation of VAT registration in terms of Section 24 of the Value-Added Tax Act, 1991, for [Company Name], Tax Reference Number: [VAT Number]. Reason for Application: [Select: Ceased trading as of DD/MM/YYYY OR Annual taxable turnover for the preceding 12 months dropped to R(Amount), falling below the R2.3M threshold.] All tax obligations, returns (VAT201 / ITR14), and outstanding liabilities are up to date. Attached please find: 1. Completed Form VAT123e 2. 12 months bank statements 3. Asset Register & Stock Schedule reflecting Exit VAT calculations 4. Certified Director IDs & CIPC Company Docs Kind regards, [Director / Public Officer Name] [Contact Number & Email]
Heinrich Grove
Heinrich Grove — Professional Accountant (SA)

SAIPA Member & Registered Tax Practitioner specializing in South African business compliance and VAT advisory.

LinkedIn Profile About Author

Top Tips for a Faster VAT Deregistration

1. Clean Up All Tax Compliance First

SARS automatically flags or rejects VAT123e applications if there are outstanding VAT201s, unfiled Income Tax returns (ITR14), or unpaid tax debt.

Tip: Clear all outstanding profiles across all tax types before submitting the deregistration request.

2. Prepare 12 Months of Supporting Documents Upfront

When SARS reviews a deregistration request, they almost always ask for proof that your turnover has dropped below the threshold or that trading has ceased.

Tip: Have 12 consecutive months of bank statements, signed company registration documents, certified director IDs, and a written explanation ready to upload on day one.

3. Verify Your eFiling Registered Representative Details

SARS routinely conducts manual telephonic or virtual verification calls before approving cancellation. If the phone number or email address on eFiling is outdated, the application stalls or gets rejected due to non-responsiveness.

Tip: Update the public officer or registered representative details on eFiling prior to submission.

4. Accurately Valuate Inventory and Assets for Exit VAT

Discrepancies between your asset register, bank statements, and declared Exit VAT (Deemed Disposal) often trigger full SARS audits, adding months to the process.

Tip: Perform a preliminary stock count and asset valuation (using the lower of cost or market value) before filing.

5. Submit via a Registered Tax Practitioner (SAIPA / SAIT)

Submitting through professional practitioner channels gives you access to dedicated SARS escalation avenues if an application stalls unnecessarily.

Tip: Work with a verified professional to ensure your submission is clean and handled correctly.

VAT Specialist Support

Connect with a VAT Specialist

Don't navigate the deregistration process alone. Fill out the form below, and we will connect you with a verified Tax Practitioner who can handle the SARS submissions and Exit VAT calculations for you.

SARS VAT Deregistration: Expert FAQ

Direct answers on 2026 threshold changes and VAT123e compliance from a SAIPA Professional Accountant.

Direct Answer: As of 1 April 2026, the compulsory VAT registration threshold is R2.3 million. If your turnover falls below this, you may choose to deregister using form VAT123e. However, if turnover drops below the voluntary threshold of R120,000, SARS may initiate a compulsory cancellation.

Direct Answer: You must continue charging VAT and filing VAT201 returns until you receive an official notice of cancellation from SARS. While SARS targets 21 business days for clean applications, verification queues can extend this process. You remain legally registered as a vendor until the specific deregistration date assigned by SARS.

Direct Answer: Exit VAT is a 15% Output Tax charge on the market value of business assets and stock held on the day before official deregistration.

  • Included: Equipment, machinery, and stock where Input VAT was originally claimed.
  • Excluded: Passenger vehicles (where input was denied) and assets held for non-taxable purposes.

Direct Answer: Yes. SARS generally permits the final VAT debt to be settled in six equal monthly installments. This relief helps vendors manage the cash flow shock associated with the "Deemed Disposal" of assets upon exiting the VAT system.

Direct Answer: You must submit a Notice of Objection (ADR1) within 80 business days. As a SAIPA Professional Accountant, I recommend attaching a fresh VAT101 application and a detailed motivational letter to prove your intent to make taxable supplies exceeding R120,000 annually.