VAT Deregistration in UAE: Eligibility, Process, Documents & Timeline
VAT registration is a legal requirement for businesses operating in the United Arab Emirates. However, it isn’t necessarily permanent. When a business closes, discontinues making taxable supplies, or suffers a substantial drop in taxable turnover, it becomes eligible for VAT Deregistration and is required to cancel its VAT registration with the Federal Tax Authority.
Key Takeaways:
- VAT deregistration is required when a business turnover falls below the threshold, ceases its operations, or shifts to exempt supplies.
- Mandatory deregistration applies when businesses no longer meet FTA's registration criteria, while voluntary deregistration is for companies with lower turnover or strategic needs.
- Key documents include VAT returns, proof of turnover, and settlement of outstanding VAT liabilities.
- Businesses must stop charging VAT, maintain records, and stay compliant with regulations after registration.
VAT Deregistration: Explained
VAT deregistration is the formal process of cancelling the Tax Registration Number of a taxable person or business with the Federal Tax Authority (FTA). Once the deregistration is approved, the business can no longer charge VAT on its sales or claim input tax on its purchases. However, they are still required to file all outstanding VAT returns and pay any pending penalties, liabilities, or administrative fines.
When Is ItRequired?
VAT deregistration is required in the following cases:
Annual turnover falls below the mandatory registration threshold: When the annual taxable turnover of the business drops below the mandatory threshold of AED 375,000 within 12 months, it is no longer required to stay VAT-registered.
Permanent closure of operations: When the business plans to permanently shut down its operations or dissolve as a taxable entity, it must apply for VAT deregistration.
Change in business structure or nature of operations: When a company undergoes major changes in its operations or structure that affects its VAT obligations, it may need to cancel the existing VAT registration.
Not meeting the voluntary registration threshold: If the turnover of voluntarily registered business drops below the threshold of AED 187,500, it needs to apply for deregistration.
No Taxable Supplies: When the company stops making taxable supplies and instead shifts to activities that are exempt or zero-rated, it must apply for VAT deregistration.
Knowing the circumstances for VAT deregistration UAE helps understand the different types and their application to various business scenarios.
Types of VAT Deregistration UAE: Mandatory vs. Voluntary
The FTA classifies VAT deregistration into two main categories based on different business circumstances:
Mandatory VAT Deregistration
When the business is legally required to cancel its VAT registration due to changes in its financial position or operations.
When the company permanently closes, liquidates, or dissolves.
When a business deals exclusively in VAT-exempt goods or services.
When the taxable turnover of the business falls below AED 375,000 in 12 months.
Voluntary VAT Deregistration
When the business chooses to cancel its VAT registration as it no longer suits
When the turnover of voluntarily registered businesses drops below AED 187,500.
When the business no longer makes taxable supplies.
If staying VAT-registered is proving too costly or unnecessary for the company’s current model.
VAT Deregistration: Who must deregister?
Businesses must opt for VAT deregistration if they fall into any of the following scenarios:
The company is closing down or being liquidated.
The ownership of the business is being transferred.
The annual revenue has fallen below the FTA's required limits.
The company is no longer selling goods or services that attract VAT.
Key documents required for VAT deregistration
When applying for VAT deregistration UAE, businesses must provide certain documents to the FTA to ensure smooth and quick processing:
Trade License or Business Closure Certificate - A copy of the valid trade license or an official closure certificate issued by the relevant authority.
VAT Returns for the Last Tax Period - The final VAT return covering the last taxable period, taxable supplies, input VAT, and any outstanding liabilities.
Proof of Turnover - Supporting evidence such as audited financial statements or turnover reports, showing that the business no longer meets the VAT registration requirement.
Final VAT Liability Settlement Proof - Documents confirming the payment of all outstanding VAT dues, including payment receipts, bank transfer slips, or FTA-issued confirmation letters
Bank Account Statement or Proof of Payment - A copy of the bank statement or receipts confirming settlement of VAT dues
Steps to apply for VAT Deregistration in the UAE
By following the VAT deregistration process carefully, businesses can ensure compliance and avoid penalties for late or incorrect steps.
- Eligibility Assessment and Financial Review – Determine the company’s eligibility for mandatory or voluntary deregistration and verify the exact date the taxable supplies ceased or fell below the threshold.
- Settlement of Outstanding Liabilities – File all pending VAT returns and clear any outstanding tax amounts or administrative penalties.
- Application Submission on EmaraTax – Access the official EmaraTax portal, meticulously fill out the deregistration form, and attach all necessary supporting evidence, such as liquidation certificates or updated financial statements.
- Proactive FTA Liaison and Query Management – The FTA may ask for additional clarifications or specific financial records to verify the tax position of the business.
- Final Approval and TRN Deactivation - Once the FTA is satisfied with all the submissions, they will issue formal approval and deactivate the TRN. They will also provide the final deregistration certificate and advise the company on the mandatory five-year record-keeping requirements.
Timeline & Deadlines for VAT Deregistration
Where deregistration is mandatory, businesses must submit the application within 20 business days from the date of eligibility. However, there's no strict deadline for voluntary deregistration, but swift application is recommended. The 20-day timeline can extend if the FTA requests additional information or conducts an audit.
If the application is incomplete, the FTA may ask for clarification and start the processing clock once the file is complete. They can refuse the application if key issues go unresolved.
Businesses that fail to apply for deregistration on time may have to face the penalty of AED 1,000, increased by AED 1,000 each month, capped at AED 10,000 in total.
Post-Deregistration formalities
Once the VAT deregistration process is completed, the company still has a few important responsibilities to attend to, such as -
Maintaining records, including invoices, VAT returns, and proof of VAT payments and refunds for at least five years.
Stop charging VAT on supplies and updating accounting systems to remove VAT calculations.
Filing any refund claims before deregistration is finalised and monitoring outstanding claims.
Calculating and remitting VAT on unsold goods and assets like machinery or property.
Re-registering for VAT if taxable turnover rises above AED 375,000 in the future.
Making updates across their operations, including invoices, accounting systems, websites, and marketing materials.
Staying compliant with UAE corporate and tax regulations, including proper bookkeeping, filing required documents, and keeping up with any legal or regulatory changes.
Common mistakes to avoid
The VAT deregistration process may look simple, but several errors and mistakes can invite penalties and compliance issues for businesses.
Assuming automatic VAT deregistration with trade license cancellation – Business owners often assume that cancelling the business license automatically closes every government and tax account.
Waiting too long to review eligibility – Businesses think about VAT deregistration long after ceasing their operations.
Using incorrect turnover figures – Businesses use rough estimates or simply look at the funds in the bank account, rather than calculating based on proper accounting records.
Ignoring VAT returns – Businesses do not follow applicable requirements and ignore existing tax obligations during the deregistration process.
Failing to keep supporting records – Businesses fail to retain relevant accounting and VAT documentation for the applicable statutory periods.
Ensure VAT compliance with our best services
We provide comprehensive VAT deregistration services tailored to your business model.
VAT eligibility assessment
Turnover calculation
VAT compliance review and advisory
VAT returns filing
Application preparation and submission
Representation before the FTA
Final VAT return submission
Assistance with penalty mitigation
Post-deregistration advisory
Our FTA-certified professionals possess deep knowledge of UAE tax laws and hence, understand the regulatory differences across jurisdictions and tailor their services accordingly. From bookkeeping and audits to final tax cancellation, we understand the specific nuances of the process and ensure timely submissions.
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