VAT deregistration after the R2,3 million threshold

On 1 April 2026 the compulsory VAT registration threshold moved from R1 million to R2 300 000. A registered vendor with taxable supplies below the new line may now have a choice that did not exist before.

If your taxable supplies for the previous twelve months are below R2 300 000, you may apply to cancel your VAT registration. You do not have to. The right answer depends on your records, assets, customers and expected turnover, not the threshold alone.

What changed on 1 April 2026

The compulsory registration threshold increased from R1 million to R2 300 000. The voluntary registration threshold increased from R50 000 to R120 000. SARS also confirms that a vendor below the compulsory threshold may apply for cancellation if the requirements are met.

Turnover must be tested using taxable supplies over the relevant consecutive twelve-month period. Do not use bank deposits, accounting profit or a financial-year total as a shortcut without reconciling the VAT treatment.

Should you remain registered?

Reasons to remain registered

• Your customers are mainly VAT vendors and expect tax invoices.
• The business regularly claims material input tax on stock, equipment or operating costs.
• Turnover is likely to move above R2 300 000 again soon.
• Deregistration would create pricing or contract changes that outweigh the administration saved.

Reasons to consider deregistration

• Taxable supplies are expected to remain below R2 300 000.
• Customers are mainly individuals or non-vendors who experience VAT as a real price increase.
• Input tax claims are limited and the filing burden is disproportionate.
• Your records and cash flow can absorb the final return and any exit VAT due.

Work out the exit VAT before applying

Section 8(2) of the Value-Added Tax Act can deem certain enterprise assets on hand to have been supplied when a person ceases to be a vendor. Section 10(5) contains the valuation rules used for that deemed supply.

Do not assume the result is simply 15% of the current selling price. The calculation can depend on the type of asset, its cost or open market value and the extent to which input tax was previously deducted. Prepare the stock listing, fixed-asset register and supporting tax invoices before deciding.

SARS's current Budget 2026 guidance excludes goods and services for which input tax was denied, including affected motor cars and entertainment, as well as assets acquired for no consideration. The same guidance permits the deregistration liability to be paid in six equal monthly instalments. Confirm the payment references and timing with SARS for the final tax period.

The output tax is declared in field 1A of the VAT201 for the final tax period stated in SARS's cancellation notice. Keep submitting returns until SARS confirms the effective cancellation date.

How the cancellation process works

• Confirm taxable supplies for the previous and expected next twelve months.
• Estimate the exit VAT on assets and identify any final input tax claims supported by valid documents.
• Submit a written cancellation request using the VAT123e process or the SARS channel applicable to your case.
• Respond to supporting-document requests and keep filing VAT201 returns until the final period SARS confirms.
• Submit the final VAT201 and settle the resulting liability or use the six-instalment arrangement confirmed in SARS's Budget 2026 guidance.

What this means for your business

The higher threshold creates a choice, not an automatic instruction to leave the VAT system. Compare the cash cost of exit VAT and lost input tax with the future filing burden, customer profile and expected growth before you apply.