If you are looking to sell your business, you can do so in three ways, namely:


  1. Selling the assets;
  2. Selling the shares; and
  3. Selling your business as a going concern.

If you merely sell the assets, that would attract VAT at the applicable rate (currently 15%). If you sell the shares in the company, this is not regarded as the sale of a going concern, as this transaction refers to a “financial service” as contemplated in section 2(1)(d) of the VAT Act. Financial services are exempt in terms of section 12(a) of the VAT Act.

What you would want to do is structure the sale of your business in such a way that the transaction, from a VAT point of view, would be zero-rated. Importantly, this is not an exemption from VAT, but applying VAT at the zero rate (0%).

In order to structure the sale of your business “as a going concern”, the provisions of section 11 of the Value Added Tax Act, No 89 of 1991 (the “VAT Act”) and specifically section 11(1)(e) thereof, which has the following requirements, have to be met:

  1. The seller and the purchaser must both be registered as VAT vendors as defined in the VAT Act;
  2. The supply (subject of the sale) must consist of an enterprise or part of an enterprise which is capable of separate operation;
  3. The parties must state specifically in their agreement of sale that the supply is a going concern;
  4. The parties must agree in their written agreement of sale that the enterprise will be an income earning activity on the effective date, being the date of transfer or take-over of the business;
  5. All the assets necessary for carrying on the enterprise must be disposed of to the purchaser; and
  6. The parties must state in the agreement of sale that the consideration for the supply (the purchase price) includes VAT at a zero rate.

We recommend including a specific clause, containing all the above requirements, in an agreement of sale of your business as a going concern so that the sales transaction may attract VAT at the zero rate.

If you have any questions regarding this article, you are welcome to send a mail to or call us at 021 882 8571.

Please note that these articles are to be considered general information sheets only and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information therein. Always contact one of your Finleys advisors for specific and detailed advice. Errors and omissions excepted (E&OE).


Anrich Marais
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