Six simple steps to cancel your VAT registration with SARS
Has your turnover fallen below the R1 million compulsory VAT registration threshold? Or has your company stopped operating in South Africa? If so, you can de-register from VAT.
But watch out, SARS catches out some unknowing VAT vendors when de-registering. If you don't de-register correctly, SARS can make you pay over additional VAT, even if you didn't charge it!
So read on as I let you in on five steps you should take to de-register from VAT correctly.
VAT registration and de-registration has never been this easy!
Do you know:
We'll give you answers to all this and more. Click here…
When you're eligible to apply for VAT;
How to correctly fill in your VAT101 form for registrations;
How to correctly fill in youVAT123e form for de-registrations;
What supporting documents you need to take to SARS; and
Your VAT responsibilities while waiting for your confirmation from SARS?
Why cancel your VAT registration?
Before I tell you how to cancel your VAT registration, let's look at the four conditions where you can ask SARS to cancel your VAT registration. These are:
The value of your taxable supplies during any12-month period is less than R1 million, excluding VAT. If your sales drop below R1 million in any period of 12 months, you can apply to de-register;
You cease to carry on any enterprise and don't plan to start conducting any enterprise in the next 12 months;
You applied for registration of a new business but never commenced operating the business; and/or
You sell your business. If you close your business, you must apply for de-registration – failure to do so can cost you a fine of R80 000 (Section 24 of the VAT Act)!
If you don't fall into these categories, SARS isn't likely to accept your application for de-registration!
Read on to find out how to apply to cancel your registration correctly…
Do you know how to handle the VAT in these situations?
How to treat input tax before you became VAT registered;
Correctly charging VAT on the sale of a going concern; and
VAT on bad debts.
The ordinary VAT rules don't apply!
Here's what you need to know…
How to apply to have your VAT registration cancelled
Make sure you meet the VAT de-registration criteria.
Apply to SARS in writing on a VAT123e form to cancel your VAT registration.
Attach a letter setting out more details. Tell SARS why you're de-registering and quote the Act to support your claim. If you're selling your business, give SARS the details of the sale and the buyer.
Sign the form and submit it to SARS.
Get proof that you submitted your form to SARS. If SARS doesn't get notification of your de-registration, they'll will hold you liable for VAT on your future sales, even if you didn't charge any!
Keep your documents in order! If SARS approves your cancellation it may not be the end of the matter. SARS will probably carry out a final audit on your business to check you've correctly accounted for the VAT!
There you have it, now you can correctly apply to de-register for VAT when you need to.
You must declare output tax "exit Vat" on the goods you keep when you de-register (section 8(2) of the Vat Act
). Turn to chapter D05: De-registering form VAT
in your Practical VAT Loose Leaf
for practical in-depth examples on how to do this correctly.
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