Closing a South African company properly follows a sequence: stop trading and settle creditors, run the final payroll and issue IRP5s, move assets out of the company, deregister the tax types with SARS and file the final returns, then apply to CIPC for deregistration. Doing it in the wrong order — particularly leaving assets in the company — is what turns a controlled closure into a forfeiture to the state.
The whole process takes around six months. Abandoning the company instead takes two years and ends with your assets vesting in the state.
The two ways this ends
Voluntary deregistration. You control the timing, move assets out first, settle liabilities, and close cleanly. Cost: professional fees plus outstanding returns. Roughly six months.
Abandonment. You stop filing. Penalties accumulate, CIPC refers the company for deregistration, and on final deregistration any assets still in the company's name are forfeited to the state as bona vacantia. Bank accounts freeze, contracts fall away, and reinstating it later requires a CoR40.5 application plus every outstanding return.
See what happens if CIPC deregisters your company.
The difference is entirely in the sequencing. A controlled closure gets your assets out first.
Before you start: is closing the right answer?
Three alternatives worth considering.
Selling the business. Even a small business with recurring customers, a lease and equipment has value. A closure realises the assets at forced-sale value; a sale realises goodwill as well.
Keeping it dormant. If you might trade through it again within a year or two, maintaining it costs roughly R2,000 to R6,000 a year and preserves the registration date, the trading history and any licences. That history has real value for tenders and finance applications. See does a dormant company still have to file returns.
Business rescue or liquidation. If the company is insolvent — liabilities exceed assets, or it cannot pay debts as they fall due — this is not a voluntary deregistration situation. Deregistering an insolvent company to avoid creditors is a different matter entirely, with director liability consequences. Take legal advice.
Voluntary deregistration is for a solvent company that has finished trading.
The sequence
Step 1 — Stop trading and tell people
Give notice to customers, suppliers, landlords and staff. Contractual notice periods apply and a lease will not simply end because you stopped trading.
Collect your debtors while you still have leverage. Once customers know you have closed, collection becomes considerably harder. This is the moment to chase, not later.
Settle creditors. A company cannot be deregistered with outstanding liabilities, and directors who allow a company to be deregistered leaving creditors unpaid may face consequences.
Cancel what recurs. Debit orders, subscriptions, insurance, card machines and delivery platform accounts.
Step 2 — Deal with employees
This has to be done properly. Closing a business is a retrenchment, and retrenchment has a legally prescribed process.
Consultation is required under section 189 of the Labour Relations Act
Notice pay per contract or the BCEA
Severance pay — at least one week's remuneration per completed year of continuous service, unless the employee unreasonably refused suitable alternative employment
Accrued leave paid out — see annual leave entitlement
UI-19 updated with the termination date and reason, so employees can claim
A tax directive is required before paying severance, which is taxed under the retirement and severance lump sum table rather than the ordinary tables
Take labour advice. Retrenchment done badly produces CCMA claims that outlive the company's ability to defend them.
Step 3 — Run the final payroll and reconcile
Final EMP201
Final EMP501 reconciliation for the period
IRP5 certificates issued to every employee
Deregister as an employer once the last payroll is done
Register every employee for income tax first. From the 202602 reconciliation period, submissions are rejected outright where any employee lacks a valid tax number — and chasing a departed employee's tax number is considerably harder than chasing a current one. See EMP501 reconciliation explained.
Step 4 — Move the assets out. Before anything else.
This is the step that determines whether closing costs you money or not.
Anything still registered in the company's name when it is deregistered is forfeited to the state. Vehicles, property, equipment, intellectual property, domain names and bank balances.
Sell or transfer:
Sell to a third party at market value — cleanest
Sell to yourself or another company at market value. Do not transfer at book value or for nil; a connected-person transaction at less than market value has tax consequences
Distribute in specie as a dividend, which attracts dividends tax at 20%
The tax consequences of moving assets:
| Consequence | When it arises |
|---|---|
| Recoupment | Selling an asset for more than its tax value — the difference up to original cost is added to taxable income |
| Capital gain | Proceeds above original cost |
| Exit VAT | On deregistering for VAT, output tax on assets and stock still held |
| Dividends tax | 20% on any distribution to shareholders |
| Transfer duty | On immovable property, depending on the transaction |
Work out the tax before you move anything. The order and method of disposal materially change the cost, and it is not reversible afterwards. See wear and tear allowances.
Step 5 — Deregister for VAT
If the company is VAT registered:
Complete a VAT123e
Continue charging VAT and filing VAT201s until the final tax period the Commissioner advises
Declare exit VAT on assets and stock on hand in fields 1A and 4A of the final return
Claim any input tax not yet claimed — nothing can be claimed after the final return is submitted
The liability can be paid in six equal monthly instalments
SARS cannot finalise the cancellation until all outstanding VAT Act obligations are resolved. Outstanding returns or arrears will stall it indefinitely.
Full detail in should you deregister for VAT.
Step 6 — Final income tax
Prepare final annual financial statements to the date trading ceased
File the final ITR14
File any outstanding IRP6 provisional returns, including nil
Settle any tax owing, or arrange payment
Do not skip the final return. An unfiled ITR14 keeps the period open, accrues administrative penalties monthly, and makes the registered representative non-compliant — which affects their other entities.
Step 7 — Close the bank account
Only once every payment has cleared and every refund has been received. Closing too early means a SARS refund with nowhere to go.
Step 8 — Apply to CIPC for deregistration
Requirements before CIPC will process it:
All annual returns filed and up to date
Beneficial ownership up to date — without it the annual return is blocked, which blocks everything
The company has ceased trading and has no assets or liabilities
A written request from the company, or from a director or shareholder
Timeline: roughly six months from application, with CIPC advertising the intended deregistration.
What it costs
| Item | Typical cost |
|---|---|
| Outstanding CIPC annual returns and penalties | R100 – R4,000 per year outstanding |
| Final financial statements and tax returns | R6,000 – R20,000 |
| VAT deregistration and exit VAT | Exit VAT is 15/115 of assets and stock on hand |
| Retrenchment costs | Notice, severance and accrued leave |
| Professional fees for the closure | R5,000 – R15,000 |
Compare that to abandonment: every asset in the company forfeited, plus penalties accruing on outstanding returns, plus a reinstatement application if you ever need the company back.
The five mistakes that cost the most
1. Leaving assets in the company. The single most expensive error. Vehicles and property forfeited to the state are recoverable only by reinstating the company, which is slow and expensive.
2. Deregistering VAT without modelling exit VAT. A stock-heavy business can face a six-figure liability it did not budget for. Timing the deregistration after the stock has run down materially reduces it.
3. Handling retrenchment informally. "The business closed" is not a defence to an unfair dismissal claim. The section 189 process is required.
4. Closing the bank account too early. Refunds and final payments need somewhere to go.
5. Stopping filing before the process completes. Every return remains due until the deregistration is final. Stopping early converts a controlled closure into abandonment.
Sole proprietors and close corporations
A sole proprietor has no entity to deregister. You stop trading, deregister the tax types — VAT, PAYE — settle liabilities, and declare the final period in your personal return. Simpler, and the assets are already yours.
A close corporation follows essentially the same CIPC process as a company. No new CCs can be registered, but existing ones deregister the same way.
Frequently asked questions
How do I close down a business in South Africa? Stop trading and settle creditors, complete the retrenchment process and final payroll, move all assets out of the company, deregister the VAT and PAYE tax types and file the final returns, close the bank account, then apply to CIPC for deregistration once all annual returns and beneficial ownership are up to date.
How long does it take to deregister a company? Roughly six months from the CIPC application, longer where outstanding returns must be brought up to date first. CIPC advertises the intended deregistration as part of the process.
What happens to assets left in a deregistered company? They are forfeited to the state as bona vacantia. That includes bank balances, vehicles, property, equipment and intellectual property. Recovery requires reinstating the company through a CoR40.5 application.
Do I have to pay severance when I close my business? Yes. Closing a business is a retrenchment, requiring a section 189 consultation process, notice pay, severance of at least one week's remuneration per completed year of service, and accrued leave paid out. A tax directive is required before paying severance.
What is exit VAT on deregistration? Output tax on enterprise assets and trading stock still held when your VAT registration is cancelled, calculated at 15/115 of the lesser of cost or open market value. It is declared in fields 1A and 4A of the final VAT201 and can be paid in six monthly instalments.
Can I deregister a company that owes money? No. A company cannot be deregistered with outstanding liabilities, and a company that is insolvent should be dealt with through liquidation or business rescue rather than deregistration. Take legal advice where liabilities exceed assets.
Is it cheaper to deregister or leave the company dormant? Dormant costs roughly R2,000 to R6,000 a year and preserves the registration date, trading history and any licences. Deregistering is a one-off cost. If you might trade again within a year or two, dormant is usually better; if not, deregistering removes an ongoing obligation.
What happens if I just stop filing? Penalties accumulate on every outstanding return, CIPC refers the company for deregistration after roughly two years, and on final deregistration any assets still in the company are forfeited to the state. It is the most expensive way to close a business.
Close it in the right order
Almost every cost in closing a business comes from sequencing — assets left in the company, VAT deregistered at the wrong point in the stock cycle, retrenchment handled informally, filing stopped too early.
Smartbook handles company closures end to end: final financial statements and tax returns, VAT deregistration and the exit VAT calculation, the final EMP501, and the CIPC deregistration application.
Last reviewed: 26 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. Retrenchment, insolvency and asset transfer questions involve legal and tax consequences that depend heavily on the facts — take advice before acting. Cost ranges are illustrative, not quotes.
Primary sources: CIPC · SARS — Cancellation of VAT registration · SARS — Budget 2026 Frequently Asked Questions · Department of Employment and Labour — Labour Relations Act · Companies Act 71 of 2008