VAT Deregistration Due to Division Amalgamation

VAT Deregistration Due to Division Amalgamation

• 13 May 2025
• VAT
• The Tax Faculty Tax Specialist

This article is based on tax law for the year ending 29 February 2026.

Question: 

A taxpayer has amalgamated two divisions into a single operating unit and now intends to deregister the VAT number associated with the redundant division, while retaining the VAT registration of the continuing division. Guidance is requested regarding the deregistration process and the associated VAT implications

Answer:

The Problem / Facts

The taxpayer has amalgamated two divisions into one and now seeks to deregister the VAT number associated with the redundant division, while retaining the VAT registration of the remaining division. Assistance is requested in respect of the process to follow and the VAT implications arising from the deregistration.

Analysis of the Tax Issues Identified

The primary issue relates to the procedural requirements for VAT deregistration following the amalgamation of two divisions, ensuring compliance with SARS’s administrative processes. Additionally, there is a tax consequence under the VAT Act concerning output tax on assets held at the time of deregistration, as a vendor is deemed to have made a taxable supply when VAT registration ceases.

List of Tax Issues and Relevant Legislative References

• VAT Deregistration Process: Section 24 of the VAT Act 89 of 1991
• Output Tax on Deregistration: Section 8(2) of the VAT Act 89 of 1991
• Compliance and Notification to SARS: Section 25 of the Tax Administration Act 28 of 2011

Application of the Law to the Facts

In this case, the taxpayer must apply to SARS to deregister the VAT number associated with the redundant division in terms of section 24 of the VAT Act. This application is submitted via SARS eFiling. Section 24 provides that a vendor must apply for cancellation of VAT registration if they cease to carry on an enterprise or if their taxable supplies fall below the registration threshold.

Given the amalgamation of the two divisions, and the intention to retain only one VAT registration, the taxpayer is required to notify SARS and request deregistration of the redundant VAT number. In line with section 8(2) of the VAT Act, the taxpayer must assess and account for output tax on any goods or assets still held by the deregistered division at the time of deregistration, where input tax had previously been claimed on those assets.

It is also important that the taxpayer can substantiate the fact that the two divisions have been formally amalgamated.

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