Deregistration of Tax Types – part 1 of 2

This article (1 of 2) outlines the relevant procedures to be followed when a taxpayer applies for deregistration of a tax type. One does not suddenly and simply “deregister”. Extensive procedures must be complied with to deregister from tax obligations. The reader is presented, in this article, with several extracts of the applicable Acts. These extracts will ensure that the process is well understood but may still require a more thorough reading of the Acts too.

This means that the status of the tax reference number for which the application is, will change to “Deregistered” after the finalisation of the deregistration process by SARS. This status will apply from a determined date.

Once the tax type is deregistered and all tax obligations at the date of deregistration are met, the taxpayer or representative taxpayer is released from any further tax obligations attached to the tax type.

VAT Act, Section 24

Section 24 of the VAT Act states that:

1) Subject to the provisions of subsection (2), every vendor shall cease to be liable to be registered where the Commissioner is satisfied that the total value of the vendor’s taxable
supplies in the period of 12 months commencing at the beginning of any tax period of the vendor will be not more than the amount referred to in section 23 (1) or (1A).

2) Every vendor who wishes to have his registration cancelled in the circumstances contemplated in subsection (1), may request the Commissioner in writing to cancel his registration, and if the Commissioner is satisfied as contemplated in subsection (1), the Commissioner shall cancel the vendor’s registration with effect from the last day of the tax period during which the Commissioner was so satisfied, or from such other date as may be determined by the Commissioner, and shall notify the vendor of the date on which the cancellation of the registration takes effect.

3) Every vendor who ceases to carry on all enterprises shall notify the Commissioner of that fact within 21 business days of the date of such cessation and the Commissioner shall
cancel the registration of such vendor with effect from the last day of the tax period during which all such enterprises ceased, or from such other date as may be determined by the
Commissioner.

4) Any notification by a vendor in terms of subsection (3) shall be made in writing to the Commissioner and shall state the date upon which that vendor ceased to carry on all enterprises and whether or not that vendor intends to carry on any enterprise within 12 months from that date.

5) Where the Commissioner is satisfied that a vendor:

(a) no longer complies with the requirements for registration as contemplated in section 23 (1) and (3); or
(b) has failed to furnish the Commissioner with a return reflecting such information as may be required for the purposes of the calculation of tax in terms of section 14 or 16, the Commissioner may cancel such vendor’s registration with effect from the last day of the tax period during which the Commissioner is so satisfied, or from such other date as may be determined by the Commissioner, provided that where such person lodges an objection against the Commissioner’s decision under this subsection the cancellation of that person’s registration shall not take effect until such time as the Commissioner’s decision becomes final and conclusive.

6) Where any person has been registered as a vendor in consequence of an application made by him under section 23 (3) and subsequent to the registration of that person as a vendor it
appears to the Commissioner that such a person’s registration should be cancelled by reason of any of the circumstances referred to in section 23 (7), the Commissioner may cancel such person’s registration with effect from a date determined by the Commissioner: Provided that where such person lodges an objection against the Commissioner’s decision under this subsection the cancellation of that person’s registration shall not take effect until such time as the Commissioner’s decision becomes final and conclusive.
7) The Commissioner shall give written notice to the person concerned of his decision to cancel such person’s registration in terms of this section or of his refusal to cancel such registration.

Applicable Legislation – PAYE

Paragraph 15 of the Fourth schedule states that:

(3) Every person who is registered as an employer shall within 14 business days after ceasing to be an employer, notify the Commissioner in writing of the fact that the employer has ceased to be an employer.

Applicable Legislation – Income Tax
Micro business – VOLUNTARY deregistration

Paragraph 9 of the sixth schedule states that:

1) A registered micro business may elect to be deregistered before the beginning of a year of assessment or such later date during that year of assessment as the Commissioner may
prescribe by notice in the Gazette.

2) A registered micro business that elects to be deregistered under subparagraph (1) must be deregistered by the Commissioner with effect from the beginning of that year of assessment.

Micro business – COMPULSORY deregistration

Paragraph 10 of the sixth schedule states that:

1) A registered micro business must notify the Commissioner within 21 days from the date on which:

a) The qualifying turnover of that registered micro business for a year of assessment exceeds the amount described in paragraph 2, or there are reasonable grounds for believing that the qualifying turnover will exceed that amount; or
b) that registered micro business is disqualified in terms of paragraph 3.

2) The Commissioner must, subject to subparagraph (3), deregister a registered micro business with effect from the beginning of the month following the month during which the event as described in subparagraph (1) (a) or (1) (b) occurred.
3) If the increase in the qualifying turnover of that person to an amount greater than the amount described in paragraph 2 is of a nominal and temporary nature, the person must apply to the Commissioner for a decision on whether the person must remain a registered micro business or not.

Companies Act

Section 82 of the Companies Act states that:

1) When the affairs of a company have been completely wound up, and a court order of final liquidation has been made; the Master must promptly file a certificate to that effect, together with a copy of the court order.

2) In addition to the duty to deregister a company contemplated in subsection (2)(b), the Commission may otherwise remove a company from the companies register only if the Commission:

(ii) has received a request in the prescribed manner and form and has determined that the company:

(aa) has ceased to carry on business; and
(bb) has no assets or, because of the inadequacy of its assets, there is no reasonable probability of the company being liquidated.

3) If the Commission deregisters a company as contemplated in subsection (3), any interested person may apply in the prescribed manner and form to the Commission, to reinstate the registration of the company.

Part 2 of this article series will describe the actual process to follow.

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