Deregistering a business in South Africa is a complex and often lengthy process that can take years to complete. Many business owners assume that once they stop trading, their company will automatically be removed from the system. However, both the Companies and Intellectual Property Commission (CIPC) and the South African Revenue Service (SARS) require formal deregistration procedures to be followed.
In this guide, we outline the steps to deregister your business with CIPC and SARS, the expected timelines, challenges you might encounter, and how to remain compliant during the process.
Understanding Business Deregistration in South Africa
Deregistration is the formal process of closing a business entity, ensuring it is no longer legally obligated to submit tax returns or annual filings. This process is necessary for companies that have ceased trading and wish to avoid ongoing compliance obligations and penalties.
How to Deregister a Business with CIPC
Step 1: Check for Outstanding Annual Returns
Before applying for deregistration, all outstanding annual returns must be settled. If a company fails to submit returns for more than two consecutive years, CIPC may initiate deregistration itself. However, this does not absolve the business from tax liabilities.
Step 2: Submit a Deregistration Request
To deregister with CIPC, you must submit a formal request including:
A letter signed by the directors or members stating the reason for deregistration.
Confirmation that the business has no assets or liabilities.
Tax clearance from SARS confirming there are no outstanding tax obligations.
Copies of identity documents of directors or members.
Step 3: CIPC Processing and Timelines
CIPC may take six months to several years to finalize deregistration, depending on whether there are outstanding returns or compliance issues. If the company has been inactive and non-compliant for years, CIPC might initiate deregistration itself, but SARS obligations remain in place.
How to Deregister a Business with SARS
Step 1: Settle All Tax Liabilities
A company must ensure that all taxes, including VAT, PAYE, and corporate income tax, are paid up.
Step 2: File Final Tax Returns
Submit the final tax return, including a Request for Deregistration via SARS eFiling or at a SARS branch. The company must submit:
A final VAT return (if registered for VAT).
PAYE reconciliations (if the company had employees).
Corporate Income Tax (CIT) deregistration request.
Step 3: SARS Processing and Timelines
SARS can take several months to over a year to process deregistration requests, especially if audits or outstanding tax issues are flagged. Many companies face prolonged delays due to tax compliance problems.
Challenges: What to Do When Deregistration Takes Too Long
Deregistration in South Africa is notorious for delays, often due to unresolved tax matters or bureaucratic backlogs. If your deregistration is taking too long, you can:
Follow up regularly: Contact SARS and CIPC periodically for updates on your case.
Use a tax practitioner: Hiring a professional can help navigate the process more efficiently.
Request a SARS Tax Compliance Status (TCS) Pin: This helps track outstanding issues and ensures compliance.
Consider voluntary liquidation: If deregistration is proving too slow, voluntary liquidation through a legal process might be an alternative.
Staying Compliant During the Deregistration Process
Until your business is officially deregistered, you must continue filing tax returns and annual CIPC filings, even if your company is inactive. Failure to do so can lead to penalties and interest charges.
Monthly and Annual Compliance Requirements
CIPC Annual Returns: Required until deregistration is finalized.
SARS Monthly Returns: VAT, PAYE, and provisional tax returns must be filed if the company is registered for these taxes.
Annual Financial Statements: These may still be required by SARS until final deregistration is approved.
Ignoring these obligations can result in legal action and personal liability for directors.
Frequently Asked Questions (FAQ)
How long does it take to deregister a company in South Africa?
Deregistration can take anywhere from six months to several years, depending on compliance status with SARS and CIPC.
Can I stop filing returns while waiting for deregistration?
No. Until deregistration is finalized, you must continue filing all required returns to avoid penalties.
What happens if I don’t deregister my company?
Your company will continue to incur compliance obligations and penalties. SARS may still pursue outstanding taxes, even if CIPC marks the business as deregistered.
Can SARS refuse my deregistration request?
Yes, if there are outstanding tax liabilities or unfiled returns, SARS will not approve the deregistration.
What if CIPC deregisters my company automatically?
Even if CIPC deregisters your company due to non-compliance, SARS tax obligations remain. You must still file a separate deregistration request with SARS.
Should I hire a professional to help with deregistration?
Yes, a tax practitioner or company secretary can help speed up the process and ensure compliance.
Final Thoughts
Deregistering a business in South Africa is a slow and bureaucratic process, requiring careful navigation of CIPC and SARS regulations. The key is to stay compliant while waiting and proactively address any outstanding tax issues. By following the correct procedures and seeking professional assistance, you can ensure a smooth and legally sound business closure.
For expert help with business deregistration and tax compliance, consult a qualified accountant or tax professional to avoid unnecessary delays and penalties.