You may apply to cancel your VAT registration if your taxable supplies will be under R2.3 million in any consecutive 12-month period. But deregistering triggers exit VAT — output tax on the stock and enterprise assets you still hold — payable in six monthly instalments. Whether it is worth it depends almost entirely on one thing: whether your customers are VAT vendors.
Since the threshold rose on 1 April 2026, this has become the most common question we get from clients turning over between R1 million and R2.3 million. The honest answer is that it is a good idea for roughly half of them and a costly mistake for the other half — and the deciding factor is rarely the one people expect.
TL;DR
You can apply to deregister if taxable supplies will be below R2.3 million over any consecutive 12 months.
Nothing happens automatically. You must apply on a VAT123e.
Deregistering triggers exit VAT: output tax on enterprise assets and trading stock on hand, valued at the lesser of cost or open market value.
Exit VAT is declared in fields 1A and 4A of your final VAT201 and can be paid in six equal monthly instalments.
Sell to consumers → deregistering usually wins. Sell to VAT vendors → deregistering usually loses.
You keep charging VAT and filing VAT201s until the final tax period SARS gives you.
The one question that decides it
Before any calculation, answer this: do your customers claim input VAT?
If your customers are VAT-registered businesses
Your 15% costs them nothing. They pay R11,500 instead of R10,000, then claim R1,500 back from SARS. Your price, from their perspective, is R10,000 either way.
Deregistering therefore gains you no competitive advantage at all — and loses you the ability to claim input VAT on every expense you incur. You go from recovering 15% of your rent, stock, software, professional fees and equipment to recovering none of it.
For a B2B business, deregistering is usually a straightforward loss.
If your customers are consumers or non-vendors
Your 15% is a real 15%. A consumer paying R11,500 for your service is R1,500 poorer than they would be paying an unregistered competitor R10,000 for the same thing.
Deregistering gives you a genuine strategic choice:
Drop your prices by up to 13.04% (the VAT-exclusive equivalent) and become materially cheaper than VAT-registered competitors, or
Keep your prices exactly where they are and take up to 13.04% more margin.
For a restaurant, salon, gym, retailer, private tutor, guest house or trades business selling to households, that is real money. This is the group for whom deregistering is usually the right call.
If you are somewhere in between
Most businesses are. Work out the split by revenue, not by customer count:
Proportion of revenue from VAT-vendor customers Above ~70% → staying registered is usually better Below ~30% → deregistering is usually better Between 30% and 70% → run the full calculation below
The cost you cannot avoid: exit VAT
This is the part most articles skip, and it is the part that changes decisions.
When your VAT registration is cancelled, you are treated as having made a supply of the enterprise assets and stock you still hold. You must account for output tax on them. SARS calls it the deemed exit VAT.
What is included
Only enterprise assets — goods manufactured, constructed or used, or rights acquired or used, for making taxable supplies where input tax was deducted. In practice:
Trading stock held at the deregistration date
Fixed assets — equipment, tools, office furniture, computers, machinery
Property used in the enterprise
What is excluded
Assets used wholly for exempt or other non-taxable activities
Goods or services on which input tax was denied — this is important: entertainment expenses and motor cars are excluded, because you were never allowed to claim the input VAT in the first place
Donated goods and assets acquired for no consideration, because their cost is regarded as zero
How it is valued
At the lesser of cost or open market value.
"Cost" includes the VAT incurred on acquisition, manufacture, construction or production, plus additional costs. In certain connected-person transactions, the deemed open market value on acquisition may form part of the cost.
The "lesser of" rule works in your favour on depreciating assets. A bakkie that cost R400,000 four years ago and is now worth R180,000 is valued at R180,000, not R400,000.
The calculation
Exit VAT is the tax fraction applied to the value:
Exit VAT = value of assets and stock × 15/115
Worked example 1: The café (deregistering wins)
Lerato runs a coffee shop. Taxable supplies for the twelve months to 30 June 2026: R1,640,000. Almost all customers are walk-in consumers.
Assets and stock on hand at deregistration:
| Item | Cost | Open market value | Lower of the two |
|---|---|---|---|
| Coffee machine and grinder | R145,000 | R78,000 | R78,000 |
| Kitchen equipment | R210,000 | R95,000 | R95,000 |
| Furniture and fit-out | R180,000 | R60,000 | R60,000 |
| Trading stock (coffee, food, packaging) | R48,000 | R48,000 | R48,000 |
| Delivery vehicle (motor car — input tax denied) | R320,000 | R190,000 | Excluded |
| Total subject to exit VAT | R281,000 |
Exit VAT = R281,000 × 15/115 = R36,652
Payable in six monthly instalments of about R6,109.
Annual benefit of deregistering:
| Registered | Deregistered | |
|---|---|---|
| Revenue (VAT-inclusive prices held constant) | R1,886,000 | R1,886,000 |
| Output VAT to SARS | (R246,000) | R0 |
| Net revenue | R1,640,000 | R1,886,000 |
| Input VAT recovered on expenses | R89,000 | R0 |
| Net position | R1,729,000 | R1,886,000 |
| +R157,000 a year |
Verdict: Lerato recovers the R36,652 exit VAT in under three months. Deregistering is clearly right — provided she holds her prices and does not simply pass the saving to customers.
Worked example 2: The engineering supplier (deregistering loses)
Sipho supplies machined components to manufacturers. Taxable supplies for the twelve months to 30 June 2026: R2,050,000. Every customer is a VAT-registered company.
Assets and stock on hand:
| Item | Lower of cost / market value |
|---|---|
| CNC machinery | R680,000 |
| Workshop tooling and equipment | R150,000 |
| Raw material and work in progress | R240,000 |
| Total subject to exit VAT | R1,070,000 |
Exit VAT = R1,070,000 × 15/115 = R139,565
Annual position:
| Registered | Deregistered | |
|---|---|---|
| Price to customers (VAT-exclusive equivalent) | R2,050,000 | R2,050,000 |
| Effective price to customer after their input claim | R2,050,000 | R2,050,000 |
| Input VAT recovered on materials, power, rent, tools | R168,000 | R0 |
| Net position | R2,218,000 | R2,050,000 |
| −R168,000 a year |
Verdict: Sipho would pay R139,565 to deregister and then lose R168,000 a year in input VAT recovery — with no pricing advantage at all, because his customers claim the VAT back. Staying registered is obviously correct.
He is also close to R2.3 million and growing. Deregistering now would likely mean re-registering within eighteen months.
The full decision checklist
Work through these in order. Any one of the first three can settle it on its own.
What percentage of revenue comes from VAT-registered customers? Above 70% — stop, stay registered.
Will you exceed R2.3 million within the next 18 months? If yes — stop, stay registered. SARS specifically advises assessing likely taxable supplies for the next 12 months before cancelling.
How large is the exit VAT? Calculate it properly. A stock-heavy or asset-heavy business can face a liability that takes years to recover.
What is your annual input VAT recovery? Pull the total from field 19 across your last four to twelve VAT201s. That is the recurring benefit you give up.
Can you actually hold your prices? The benefit of deregistering for a B2C business only materialises if you keep prices at the VAT-inclusive level. If competitive pressure forces you to drop them, you have swapped a tax saving for a price cut.
What is the compliance saving worth? Real, but usually smaller than people assume — perhaps R500 to R1,500 a month of accounting fees for a straightforward business.
Do any customers require a VAT number to trade with you? Some corporates and government supplier databases effectively expect it. Check before you cancel.
How to deregister: the process
Step 1 — Confirm you qualify
You may apply in writing for cancellation where the value of your taxable supplies will be less than R2.3 million in any consecutive period of 12 months.
SARS may also cancel a registration where you have ceased the enterprise, never commenced it, no longer meet the registration requirements, or have failed to furnish required returns. Voluntary registrations can additionally be cancelled where the vendor has no fixed place of business, does not keep proper accounting records, or has not opened a business bank account.
Step 2 — Bring everything up to date first
SARS cannot finalise a cancellation until all outstanding liabilities and obligations under the VAT Act are resolved or settled.
That means every outstanding VAT201 must be filed and every outstanding balance paid before cancellation can complete. If you have arrears, deal with them first — or arrange payment terms — or the application simply sits.
Step 3 — Complete the VAT123e
Use the VAT123e ("Application for the cancellation of registration of a person in respect of all his enterprises"). If you are only cancelling a separately registered enterprise, branch or division, use the VAT123T.
State clearly on the form, or in an attached letter, the circumstances giving rise to the cancellation.
Step 4 — Submit it
Three routes:
Submit the form to the SARS branch where you are registered
Email the cancellation request to SARS
Book a virtual appointment through SARS eBooking — select reason category "Other" and reason for appointment "VAT and PAYE registration/deregistration"
Step 5 — Keep operating as a vendor until told otherwise
This is where businesses create liabilities for themselves. You must continue to charge VAT on supplies made, account for output tax, and deduct input tax up to the last day of the final tax period advised by the Commissioner. Late payment of VAT in this window still attracts penalties and interest.
Do not stop charging VAT on the day you post the form.
Step 6 — SARS issues the notice of cancellation
The Commissioner issues a notice confirming the effective date of cancellation and your final tax period.
Step 7 — File the final VAT201 with the exit VAT
In the final tax period, declare:
The value of the assets and rights on hand in field 1A
The output tax on them in field 4A
Declare this together with any other output tax and input tax for that period.
Step 8 — Claim anything you have not yet claimed
You may claim input tax or other deductions not previously made in the final VAT return, provided you hold the prescribed documentary proof when the return is submitted and the deduction is made within five years from the date you became entitled to it.
No deductions may be made after the final VAT return has been submitted. Go through your records before you file — this is your last chance.
Three traps to check before you file the final return
Trap 1: Input VAT claimed on invoices you never paid
If you deducted input tax but did not pay your supplier within 12 months, you must account for output tax on that amount at the time of cancellation. If you have already made that adjustment in an earlier period, there is no further obligation to the extent VAT has already been accounted for.
Run an aged creditors report before you file. Anything over 12 months old that you claimed input VAT on needs adjusting.
Trap 2: Understating the exit liability
If you fail to declare, or understate, your liability in the final VAT201, SARS will raise assessments and you will be liable for penalties and interest. Errors can be corrected through the Request for Correction process, but it is far cheaper to get the asset schedule right the first time.
Trap 3: Deregistering when you are about to grow
SARS spells out the test: assess the total value of taxable supplies likely to be made in the next 12 months, based on the previous 12 months. If you exceeded monthly taxable supplies of R191,667 and have no reason to believe that will change, you are likely to remain liable for compulsory registration anyway.
Timing: when you deregister changes what it costs
Because exit VAT is charged on assets and stock on hand at the date of cancellation, the liability is not a fixed number. It moves with your balance sheet — which means timing is a lever most businesses never think to pull.
If you carry stock, go after your selling season, not before it. A retailer, wholesaler or restaurant holding peak stock in November faces a materially larger exit charge than the same business in February. On R400,000 of stock, the difference between peak and trough can easily be R30,000 to R40,000 of exit VAT.
If you are about to buy equipment, decide first. Buying a R500,000 machine, claiming R65,217 of input VAT and then deregistering three months later means paying most of that back as exit VAT on an asset that has barely depreciated. Either buy after cancellation, or postpone cancellation.
If you are about to dispose of old assets, do it before you go. Selling a fully depreciated asset while registered means output VAT on the actual selling price. Holding it through cancellation means exit VAT on the lesser of cost or open market value. Depending on the asset, one is meaningfully cheaper than the other — run both.
Remember the process itself takes time. SARS cannot finalise cancellation until every outstanding VAT Act obligation is resolved, and the Commissioner then sets the final tax period. You do not control the exact date, so plan around a range rather than a day.
What changes in your business the day cancellation takes effect
Deregistration is not just a SARS event. It touches your systems, your documents and your customer relationships, and the changes have to happen on the effective date — not before, and not whenever you get to them.
Invoicing must change. From the effective date you may no longer issue tax invoices, show a VAT line, or state a VAT registration number on any document. Continuing to charge an amount described as VAT after cancellation is not a paperwork slip — it is collecting tax you have no right to collect. Update your invoicing software, quote templates and any recurring invoices on the day.
Published prices need reviewing. Menus, rate cards, websites, proposals and price lists that say "incl. VAT" or "excl. VAT" all need updating. If you decided to hold prices at the old VAT-inclusive level, the wording still has to change even though the number does not.
Tell your B2B customers in advance. A VAT-registered customer who has been claiming input VAT on your invoices needs to know it stops. Finding out through a rejected input claim months later damages the relationship. A short email confirming the effective date is enough.
Update supplier and platform records. Anywhere your VAT number is stored — Central Supplier Database, corporate vendor-master systems, marketplace seller accounts, accounting integrations — needs correcting.
Keep your records. Cancellation does not end your record-keeping obligation for the periods you were registered. SARS can still verify and audit those periods, and you may still need to correct the final return.
What if SARS wants to cancel your registration?
If you are voluntarily registered and your taxable supplies over the preceding 12 months were below R120,000, SARS will notify you of its intention to cancel.
Agree? SARS cancels from a future tax period and confirms your final tax period and last return.
Disagree? Object using an ADR1 Notice of Objection, with written reasons, a completed VAT101 registration application and all supporting documents, emailed to SARS within 80 business days of the notice date. You will be informed of the outcome.
Can you re-register later?
Yes, but it is not a switch you flip. To reactivate a VAT number, you must still meet the definition of an enterprise under the VAT Act, and you must provide all required supporting documents together with the date and reasons for the reactivation request.
In practice, treat a round trip as costing you: exit VAT out, a fresh application in, a new SARS review, and system and invoicing changes twice. That is why the 18-month growth test matters so much.
Frequently asked questions
Can I deregister for VAT if my turnover is under R2.3 million? Yes. You may apply in writing where the value of your taxable supplies will be less than R2.3 million in any consecutive 12-month period. SARS will not do it automatically — you must apply on a VAT123e.
How much does it cost to deregister for VAT? There is no SARS fee, but there is exit VAT: output tax at 15/115ths of the lesser of cost or open market value of enterprise assets and trading stock on hand at cancellation. Assets on which input tax was denied — entertainment and motor cars — are excluded.
Can I pay the deregistration VAT liability over time? Yes. SARS allows payment in six equal monthly instalments, and has indicated a regulation may be issued extending that period.
Do I stop charging VAT as soon as I apply to deregister? No. You must continue to charge VAT, account for output tax and deduct input tax up to the last day of the final tax period advised by the Commissioner. Stopping early creates a liability with penalties and interest.
How long does VAT deregistration take? It depends primarily on whether your affairs are in order. SARS cannot finalise a cancellation until all outstanding VAT Act liabilities and obligations are resolved, so outstanding returns or arrears will hold it up indefinitely.
Is my motor vehicle included in the exit VAT calculation? A motor car as defined in the VAT Act is excluded, because input tax was denied on it in the first place. Vehicles that fall outside that definition — bakkies and certain commercial vehicles on which you did claim input tax — are included.
Should I deregister if half my customers are businesses? Run the full calculation. Weight it by revenue rather than customer numbers, compare your annual input VAT recovery against the pricing advantage you would gain on the consumer half, and factor in the exit VAT. In the 30–70% band the answer is genuinely case by case.
What happens to my VAT number after cancellation? It is cancelled. Reactivating later requires meeting the enterprise definition again and submitting a fresh application with supporting documents and reasons.
Run the numbers before you decide
Getting this wrong in either direction is expensive: deregister when you should not and you lose your input VAT recovery permanently; stay registered when you should not and you carry a 15% price disadvantage against every unregistered competitor.
Smartbook models the full picture for clients — customer mix by revenue, annual input VAT recovery from your VAT201 history, the exit VAT on your actual asset register, and the growth trajectory that decides whether you would be back over R2.3 million anyway. Where deregistering is the right call, we handle the VAT123e, the outstanding returns SARS requires first, and the exit VAT declaration in fields 1A and 4A of the final return.
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Last reviewed: 26 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. Worked examples are illustrative and use assumed figures; your exit VAT depends on your own asset register and stock on hand. This is general guidance, not advice on your specific circumstances.
Primary sources: SARS — Cancellation of VAT registration (Deregistration) · SARS — Budget 2026 Frequently Asked Questions · SARS — VAT123e application form · SARS — Request for Corrections