VAT Deregistration in UAE

VAT deregistration in the United Arab Emirates (UAE) is a process whereby a VAT-registered business requests to cancel its registration with the Federal Tax Authority (FTA). There are several reasons why a business might want to deregister, such as if it stops making taxable supplies or if its taxable turnover falls below the mandatory VAT registration threshold.

A Step-By-Step Guide On How To Go About VAT Deregistration In The UAE:

  1. Eligibility Check: A business can apply for VAT deregistration in two scenarios:

If their taxable supplies and imports in the last 12 months were less than the voluntary registration threshold (AED 187,500). If the business stops making taxable supplies and does not expect to make any in the next 12 months.

  1. Application Submission: The deregistration application should be submitted within 20 business days of becoming eligible for deregistration. Failure to apply for deregistration within this timeframe can result in penalties.
  2. Online Process: The deregistration application is made online through the FTA portal. You will need to log in to your account, go to the ‘Deregistration’ tab, and fill in the required information.
  3. Review By FTA: After submission, the FTA will review the application. During this process, they may ask for additional documents or information.
  4. Approval and Deregistration: If the FTA approves the application, the business’s VAT registration will be cancelled from the last day of the tax period during which the eligibility criteria were met.

Remember, it’s important to continue filing VAT returns and pay any due taxes until the deregistration is approved and finalized by the FTA.

Eligibility for VAT Deregistration in UAE:

There are two forms of VAT deregistration UAE wide: mandatory and voluntary. Let’s take a look at both types and their conditions.

Mandatory VAT Deregistration:

Mandatory VAT deregistration is a process that a business must undertake if it no longer meets the criteria for being VAT registered. This can occur due to several reasons, such as a significant drop in turnover or cessation of business activities.

While the exact criteria and process can vary between countries, here’s a general overview:

  1. Eligibility: A business becomes eligible for mandatory VAT deregistration when it no longer meets the minimum threshold for VAT registration. For example, if a business’s taxable turnover drops below the mandatory VAT registration threshold, it must apply for deregistration.
  2. Timeframe: Businesses usually have a specific timeframe in which they must apply for deregistration after becoming eligible. Failure to do so within this period could result in penalties.
  3. Application Process: The business must submit an application for deregistration to the relevant tax authority, usually through an online portal.
  4. Review and Approval: The tax authority will review the application and, if approved, the business’s VAT registration will be cancelled.
  5. Ongoing Obligations: Even after applying for deregistration, businesses must continue to meet their VAT obligations (such as submitting returns and paying any owed VAT) until their deregistration is formally approved by the tax authority.

In the context of the UAE, businesses must apply for mandatory deregistration within 20 business days of becoming eligible. If the taxable supplies and imports in the last 12 months were less than the voluntary registration threshold (AED 187,500), or if the business stops making taxable supplies and does not expect to make any in the next 12 months, then they are eligible for VAT deregistration.

Voluntary VAT Deregistration:

Voluntary VAT deregistration is a process that businesses can undertake if they no longer want to be VAT registered. This usually happens when a business’s taxable turnover falls below the voluntary registration threshold, but it’s still above the deregistration threshold.

A general idea of how voluntary VAT deregistration works:

  1. Eligibility: A business becomes eligible for voluntary VAT deregistration when its taxable supplies fall below the voluntary registration threshold, yet remain above the deregistration threshold.
  2. Timeframe: There is usually no set timeframe within which a business must apply for voluntary deregistration, as long as it continues to meet its VAT obligations.
  3. Application Process: Like with mandatory deregistration, the business must submit an application to the relevant tax authority, generally through an online portal.
  4. Review and Approval: The tax authority will review the application. If approved, the business’s VAT registration will be cancelled.
  5. Ongoing Obligations: Until the deregistration is formally approved, businesses must continue to meet their VAT obligations, such as submitting returns and paying any owed VAT.

In the UAE context, businesses can voluntarily deregister for VAT if their taxable supplies and imports in the last 12 months were less than the mandatory registration threshold (AED 375,000), but more than the voluntary registration threshold (AED 187,500).

Remember, it’s always wise to consult with a tax professional or advisor before proceeding with VAT deregistration to ensure you understand all the implications for your business.