The process begins with applying for the cancellation of registration to your local SARS branch or via eFiling, clearly stating that your turnover will remain below the new threshold. SARS will confirm a final tax period and issue a cancellation notice only once all outstanding returns, payments, and liabilities are settled. You must continue charging output VAT and claiming input tax until the last day of that period.
The biggest immediate risk is the VAT exit charge under section 8(2) of the Value-Added Tax Act 89 of 1991. Deregistration deems you to have disposed of all enterprise assets, trading stock, capital goods, consumables, and certain rights, at the lower of their VAT-inclusive cost or open-market value on the cancellation date. Output VAT (15/115) becomes payable on your final return. Recent creditor balances on which you previously claimed input tax may also trigger an adjustment. Depending on your asset base, this one-off liability can strain cash flow significantly. In past threshold increases, SARS sometimes allowed payment over six months, but no guarantee exists yet for 2026.
Beyond the exit charge, deregistration means permanently losing the ability to claim input VAT on future purchases. If your business incurs substantial VAT on expenses (rent, equipment, services), this could raise your net costs. Conversely, if input claims are minimal, the lost claim savings may be negligible.
Customer impact is equally critical. VAT-registered clients currently claim your output VAT as input credit, making your pricing neutral for them. After deregistration, they cannot, so they may demand discounts or switch suppliers. For non-VAT clients (end consumers or exempt entities), however, you would have 2 choices: keep your consumer price at the current levels to increase profitability or drop your prices by the VAT component, improving competitiveness, particularly in consulting, professional services, or retail.
Administrative relief is a clear benefit. No more regular VAT returns, detailed reconciliations, or accountant fees for compliance. For many micro-businesses, this frees time and money. Yet if your turnover later exceeds R2.3 million per annum, compulsory re-registration will follow, potentially disrupting operations.
Timing matters. Plan deregistration when assets are low and cash flow is strong. Reduce creditor balances beforehand, where possible, to minimise the exit adjustment.
Ultimately, deregistration suits businesses with low input VAT, non-VAT clients (typically end consumers), and stable turnover below the new threshold. For others, voluntary registration may still make financial sense, every situation differs. A rushed decision could turn a compliance saving into an expensive surprise.
Disclaimer: This article is the personal opinion/view of the author(s) and does not necessarily present the views of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever, and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken based on this content without further written confirmation by the author(s).
