In the UAE, businesses have the option to terminate their VAT registration with the Federal Tax Authority through a process termed VAT deregistration, also referred to as VAT cancellation or termination of VAT registration. Approval for VAT deregistration in the UAE hinges on meeting specific requirements and demonstrating legal justification.
Companies in the UAE can choose to deregister from VAT if they cease taxable supply activities or if their turnover within the initial 12 months of FTA registration remains below AED 187,000. This article delves into the details of VAT deregistration for companies.
Deregistration for VAT in UAE
In the UAE, the process of VAT deregistration is conducted digitally via the FTA website. To initiate VAT deregistration, companies ceasing operations must first obtain a company liquidation notice from relevant government agencies. Unicorn Global Solutions facilitates VAT deregistration for businesses in Dubai and across the UAE, offering efficient services.
As per the recent update from the FTA, companies have the opportunity to opt out of VAT under specific circumstances outlined in Federal Decree-Law No. 8 of 2017.
VAT deregistration in the UAE is a statutory process enabling businesses to cease tax payments, either voluntarily or as mandated by specific regulations.
The FTA carefully reviews all applications for VAT deregistration submitted by companies in the UAE. Upon meeting all legal requirements, the FTA proceeds to invalidate the entity’s associated VAT registration number. However, if the reasons cited for deregistration are invalid and the prerequisites are not met, the FTA may reject the application.
The FTA emphasizes the importance of voluntary compliance by Taxable Persons for the effective functioning of the UAE Tax System. This encompasses various aspects, including registration, filing tax returns, settling overdue taxes, and deregistration procedures.
Therefore, companies in the UAE may choose to apply for VAT deregistration voluntarily or may be obligated to do so under specific circumstances.
Voluntary Deregistration Criteria
According to Article 17, a Registrant can only apply for VAT deregistration after 12 months from the tax registration date.
A company can initiate the voluntary deregistration process if:
– Twelve months have elapsed since the tax registration date.
– It no longer conducts taxable goods sales.
– Its annual revenue falls below AED 187,500, even after engaging in taxable transactions.
– The total expected value of taxable supplies or costs in the next 30 days will not exceed the voluntary registration threshold.
– The company has ceased trading permanently.
In essence, a company may opt for voluntary VAT deregistration if it meets the criteria:
registered for at least a year, no longer involved in taxable goods sales, annual turnover below AED 187,500, never expects to surpass the voluntary registration threshold, or ceases operations permanently.
Mandatory Deregistration Criteria
A business must initiate deregistration procedures under the following circumstances:
– The company’s revenue drops below AED 375,000.
– The company discontinues the provision of taxable items.
In summary, if a company’s income falls below AED 375,000 or it ceases to supply taxable items, it is obligated to commence the statutory deregistration process.
VAT Deregistration for Groups
The FTA approves group VAT registration termination in these cases:
– When registered enterprises no longer meet group recognition criteria.
– If businesses within the group are no longer financially linked.
Maintaining group tax status is advised to prevent potential tax evasion risks. Upon deregistration approval, the issued VAT number becomes invalid. Companies in the group can reapply for VAT registration by initiating the registration process anew, resulting in the issuance of a new VAT number.
Reasons for Rejecting Deregistration
Deregistration won’t proceed if:
– The application isn’t submitted within 20 business days.
– Outstanding administrative penalties or taxes exist.
– All necessary tax returns for the registration period are not filed.
VAT Deregistration Penalties in UAE
Failing to comply with VAT deregistration rules can lead to heavy fines by the FTA. Here are the key penalties to watch out for:
Deregistering Late
You must cancel your VAT on time — or pay AED 10,000.Not Giving Records in Arabic
If you don’t provide documents in Arabic when asked — AED 20,000 fine.Not Informing About Legal Representative
If you appoint someone but don’t tell the FTA — pay AED 20,000.Not Updating Tax Info (Amendments)
First time: AED 5,000
If repeated: AED 15,000
Not Keeping Required Records
First time: AED 10,000
If repeated: AED 50,000
Wrong Final VAT Return
First mistake: AED 3,000
Repeat mistake: AED 5,000
Plus: You might pay 50% of unpaid tax if you don’t report it yourself.
Not Appointing Legal Rep When Asked
First time: AED 1,000
If repeated: AED 2,000
How to Deregister VAT in the UAE:
– Ensure compliance with all UAE VAT deregistration conditions.
– Access your VAT Account via the FTA Portal by logging in.
– Complete the VAT deregistration form with accurate details, including the reason for deregistration.
– Upon successful submission, you’ll receive an SMS confirmation on your registered phone number.
Submit the form digitally.
– Initially, the application status will be “Pre-Approved.” It will transition to “Approved” once all outstanding financial obligations are settled.
Consider retaining your TRN and filing zero-tax returns if you plan to continue operating your business or anticipate significant returns in the next twelve months.
How Unicorn Global Solutions Can Help
Unicorn Global Solutions offers specialized all VAT Services like VAT Deregistration services aligned with Emirati VAT regulations, catering to businesses across the UAE. With meticulous attention to detail, Unicorn Global Solutions simplifies and streamlines the entire deregistration process.
We thoroughly assess your company’s operations and determine the likelihood of deregistration, ensuring a smooth experience. Text us on whatsApp or call us today .
NOTE:
The above note is subject to further study and clarification. It does not constitute a formal opinion from our end. Before making any decisions based on the above, we recommend consulting our experts on the subject.
Frequently Asked Questions (FAQs)
VAT deregistration is the formal process of cancelling a company’s VAT registration with the Federal Tax Authority (FTA) when it is no longer eligible or required to be registered under UAE VAT law.
A company should apply for VAT deregistration if:
It has stopped making taxable supplies
Its annual taxable turnover falls below AED 187,500
The business is shutting down or ceasing operations
The application must be submitted within 20 business days from the date the business becomes eligible. Late applications may result in a penalty of AED 1,000 or more.
Trade License copy
Emirates ID & Passport of the Owner
VAT Certificate
Final VAT Return and Payment proof
Business closure documents (if applicable)
Once submitted, the FTA typically processes the application within 10 to 20 business days, provided all requirements are met and no dues are pending.
