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VAT: Think before registering or deregistering

Jaco Odendaalby Jaco Odendaal

After the threshold for registration as a VAT vendor (as stated in section 23 of the VAT Act) was increased from R300 000 to R1 million on 1 March 2009, many vendors are wondering whether they should deregister.

In my opinion a business should not register for VAT unless it is compelled to do so. The completion of VAT returns is an onerous administrative task, especially for smaller enterprises. The benefits of claiming input taxes on large transactions, such as a property purchase, are also not as lucrative if one takes into consideration that output tax will have to be charged on the future sale of such property (of which the vallue will have increased by then).

Section 18 of the Act requires that vendors who deregister for VAT account for output tax on all capital assets with an original cost price of R40 000 or more. In cases where a vendor has a large asset base on which input tax was claimed, output tax will have to be accounted for on those assets at the highest of cost price or market value.

A deregistration for VAT purposes might be beneficial, but it might also have far-reaching cash flow implications.

For more information, contact Jaco Odendaal at