There’s a quiet decision facing thousands of South African businesses right now, and most owners don’t even know they have a choice to make 🤔
On 1 April 2026, the compulsory VAT registration threshold jumped from R1 million to R2.3 millio, the first change in 17 years. Overnight, a huge band of businesses turning over between R1m and R2.3m went from “must be VAT registered” to “don’t have to be.”
So if that’s you, a real question opens up: should you deregister for VAT? It’s not a simple yes, and there’s a costly trap hidden in the answer. Let’s walk through it.
⚠️ This is general information, not personal tax advice. VAT deregistration has real financial consequences — run your specific numbers with an accountant before applying.
📊 First: do you even qualify to deregister?
You can apply to cancel your VAT registration if your taxable supplies will be below R2.3 million in any consecutive 12-month period. (SARS sets out the rules on its cancellation of VAT registration page.)
But here’s the critical bit most people miss: deregistration is not automatic. Falling below the threshold gives you the option to deregister, SARS doesn’t do it for you. You must actively apply (using form VAT123e), and you must keep charging VAT and submitting VAT201 returns right up until SARS issues official confirmation of cancellation. Stop early and you’re non-compliant 🚩
💰 The exit VAT trap nobody warns you about
This is the part that catches business owners out, and it’s the single most important thing in this article.
When you deregister, SARS treats it as though you sold all your business assets to yourself the moment before you stopped being a vendor. This “deemed disposal” (under section 8(2) of the VAT Act) means you have to pay output VAT on the assets still in your business, stock, equipment, vehicles, and other qualifying assets on hand at deregistration.
In other words: walking away from VAT can come with a bill 💸 If your business holds significant assets, that exit VAT can be substantial, and it’s exactly why deregistering “to save admin” can backfire if you haven’t done the maths.
The one relief: SARS generally allows you to pay the exit VAT liability in six equal monthly instalments, which softens the cash-flow blow.
❓ Should I actually deregister, or stay registered?
This is where it becomes a genuine business decision, not just an admin one. Broadly:
✅ Deregistering may make sense if:
- Your customers are mainly the public / end-consumers (dropping VAT effectively makes you 15% cheaper or improves your margin)
- You’re a service business with few assets and little input VAT to claim
- The bi-monthly VAT201 admin genuinely outweighs the benefit
❌ Staying registered is often better if:
- Most of your customers are VAT-registered businesses (they claim the VAT back, so it doesn’t affect them, and you keep claiming input VAT)
- You hold significant assets (the exit VAT cost of leaving is high)
- You claim meaningful input VAT on stock, equipment or services
- Being VAT-registered matters for credibility with larger clients
The service business with few assets and consumer customers is the classic deregistration candidate. The asset-heavy business selling to other businesses usually shouldn’t touch it 🎯
❓ What happens if my turnover drops below R120,000?
Different situation. The voluntary registration threshold also rose, to R120,000. If your turnover falls below that voluntary level, SARS can move to compulsorily cancel your registration. So very small vendors may find the decision made for them. (If you’re weighing registration in the first place, see our guide on when you must register for VAT.)
❓ How do I deregister, and how long does it take?
In short: make sure all your VAT returns are up to date, submit form VAT123e with your reasons, declare any exit VAT in your final return, and keep operating as a VAT vendor until SARS confirms cancellation. Clean applications with everything in order are processed faster; missing returns or verification queries drag it out. Because of the exit VAT calculation and the timing, this is one of those jobs where getting it right the first time genuinely matters 📋
🎯 Don’t flip the switch without doing the maths
The higher VAT threshold is good news, but “you can deregister” is not the same as “you should.” The right answer depends on your customers, your assets and your input VAT, and the exit VAT trap means a wrong move can cost you more than the admin you’re trying to escape.
Go2 Accounting helps businesses across Pretoria and Tshwane (and clients throughout South Africa) work out whether deregistration actually benefits them, running the exit VAT numbers, handling the VAT123e application, and getting it right. Get in touch before you apply.
Because the smart move isn’t always to deregister, it’s to know whether you should 😉
This is general information based on 2026 VAT rules, not personal tax advice. Always confirm current requirements with SARS or a registered tax practitioner.
