It has been two years since the introduction of VAT in the UAE, and most businesses in the region are well aware of the significance of VAT registration with the Federal Tax Authority (FTA). However, one vital process that often receives less attention from eligible businesses is VAT deregistration.
VAT deregistration holds the same level of importance as VAT registration, and companies should possess a better comprehension of when and under what circumstances they should initiate the process of VAT deregistration in the UAE . Failure to do so promptly may result in severe penalties for late application.
Companies must submit their deregistration request within 20 business days of becoming eligible for VAT deregistration. Neglecting to apply for deregistration within this timeframe will result in a penalty of AED 10,000.
What is VAT Deregistration?
VAT deregistration, also referred to as VAT cancellation or termination of VAT registration, is the process of canceling a business’s VAT registration with the UAE Federal Tax Authority. The FTA can approve VAT deregistration in the UAE only if the reasons for termination are valid and the conditions outlined by the law are met.
Businesses in the UAE have the option to de-register from VAT if their turnover in the first 12 months after registration did not exceed AED 187,000 or if they cease to provide taxable supplies.
Who is Eligible for VAT Deregistration?
Companies that are registered for VAT but no longer engage in taxable supplies have the option to apply for tax deregistration with the FTA.
Additionally, VAT-registered companies can voluntarily deregister if the value of their taxable goods and services falls below the prescribed threshold of AED 375,000 but remains above the voluntary threshold of AED 187,500. However, if the value of taxable supplies drops below the voluntary threshold, the company is obligated to deregister from VAT.
According to the FTA guidelines, there are two types of VAT deregistration that companies may undergo. The first is voluntary VAT deregistration, where companies proactively apply for deregistration.
The second is compulsory VAT deregistration, in which the FTA cancels the VAT registration of eligible firms. Whether it is voluntary or compulsory, it is crucial for companies to have a clear understanding of the criteria and eligibility requirements for the deregistration process.
To gain comprehensive knowledge about these regulations, businesses are advised to seek assistance from reputable VAT consultant in Dubai and consider outsourcing their tax services to them.
Mandatory vs Voluntary Deregistration
• Mandatory VAT Deregistration
As per the FTA guidelines, certain conditions must be met when undergoing VAT deregistration:
• If a company ceases to engage in transactions involving taxable goods and services, it is required to deregister for VAT.
• If the total annual turnover of taxable supplies or expenses over the past twelve months falls below the VAT registration threshold of AED 187,500, deregistration is mandatory without any option.
It is important to note that there is a time limit of 20 business days to apply for VAT deregistration in the UAE. Failure to comply within this timeframe will result in penalties. If a business fails to apply for mandatory VAT deregistration in the UAE, a penalty of AED 10,000/- will be imposed.
• Voluntary VAT Deregistration in UAE
In the UAE, voluntary VAT deregistration can occur under two circumstances. If your annual turnover for the past twelve months falls below AED 375,000, you have the option to proceed with voluntary VAT deregistration. However, it is important to note that if the annual turnover drops below AED 187,500, VAT deregistration becomes compulsory.
If you initially opted for voluntary VAT registration, you have the flexibility to choose voluntary VAT deregistration anytime after twelve months from the registration date. There is no specific time limit for conducting voluntary VAT deregistration in the UAE.
To ensure a successful deregistration process, it is advisable to seek the services of experienced and qualified tax agents who have a proven track record in handling such matters.
How to Deregister for VAT in UAE?
AT deregistration in the UAE is a digital process carried out through the FTA portal. However, businesses that cease operations are required to obtain a company liquidation letter from government authorities in order to apply for VAT deregistration. CDA specializes in providing streamlined VAT deregistration services in Dubai and the UAE, assisting businesses in canceling their VAT services.
In a recent announcement, the FTA stated that companies can choose to deregister from VAT based on specific conditions outlined in Federal Decree-Law No. 8 of 2017. VAT deregistration in the UAE is a procedure that allows businesses to voluntarily or mandatorily withdraw from their tax obligations. Once the application for VAT deregistration in the UAE is submitted to the FTA, it undergoes a review process to ensure compliance with the law. If the reasons provided are valid and the conditions are met, the FTA will cancel the VAT number assigned to the entity.
However, if the reasons are deemed invalid or the conditions are not fulfilled, the FTA may reject the deregistration application. The FTA emphasizes that the UAE Tax System relies on voluntary compliance by taxable persons, whether it involves registration, filing tax returns, payment of taxes, or deregistration.
Here’s a step-by-step VAT deregistration process:
1. Go to the FTA VAT portal and log in to your account.
2. On the dashboard, locate the VAT registration and click on the “de-register” button.
3. The VAT deregistration application will already have the taxable person’s details pre-filled.
4. Choose the reason for VAT deregistration from the available options in the drop-down menu.
5. The effective date for de-registration will depend on the specific de-registration circumstances.
6. Click on the “Choose Files” button to upload all the required supporting documents.
7. Before submitting the application, review and confirm the authorized signature and declaration sections.
8. The FTA will review the application, and if approved, the status will change to “Pre-approved.”
9. Finally, to complete the VAT deregistration procedure, the business must submit its VAT return filing and settle any outstanding liabilities.
Deregistration Process for VAT Groups
The eligibility requirements for VAT deregistration of VAT groups align with the criteria for individual taxable entities. However, there are additional criteria specific to VAT groups that must be considered when applying for deregistration:
• Approval for VAT deregistration will be granted if the VAT group no longer meets the conditions necessary to be considered as a VAT group.
• Deregistration may be granted if the constituent member companies are no longer financially associated with the VAT group.
• The FTA may approve deregistration if there are concerns that the tax status of the VAT group could potentially result in tax evasion.
It is important for VAT groups to fulfill these criteria in order to be eligible for deregistration.