A Guide Value Added Tax (VAT) Deregistration in the UAE

Two years have passed since the introduction of VAT in the UAE and every business here is mostly aware of the importance of VAT registration with the Federal Tax Authority (FTA). However, one crucial process that often gets downplayed by the eligible business is VAT deregistration. VAT deregistration is as important as VAT registration and the companies should have a better understanding of when and under what circumstances they should apply for VAT deregistration in the UAE otherwise heavy penalty may be attracted for late application for VAT deregistration. The companies need to apply for deregistration within 20 business days of becoming eligible for VAT deregistration. The failure to apply to deregister within this timeframe would attract a penalty of AED 10,000.

What is VAT Deregistration?

VAT deregistration is a process where the registered companies are required to cancel their VAT registration with the FTA. The deregistration process becomes mandatory when the taxable company ceases its operations or the requirement of VAT registration is no longer needed. The taxable businesses need to apply for VAT deregistration and the FTA will cancel the registration once it receives the application after the successful submission of the required documents. The Taxable firms need to know all the procedures of the VAT deregistration as the failure to apply will attract administrative penalties. The expert advice of the best VAT consultancy services in Dubai, UAE could be availed to apply for VAT deregistration on time and prevent the penalties.

Eligibility for VAT Deregistration

The registered companies that no longer deal with the taxable supplies can apply for tax deregistration with the FTA. The VAT registered companies are also eligible for voluntary deregistration if the value of the taxable goods and services is decreased by the prescribed threshold of AED 375,000 but above the voluntary threshold of AED 187,500. But, when the taxable supplies are below the voluntary threshold then the company is compulsorily required to deregister from VAT.

As per the FTA guidelines, the companies undergo two types of VAT deregistration. In the first instance, the companies can apply for voluntary VAT deregistration. The second is compulsory VAT deregistration where the FTA itself cancels the VAT registration of the firms eligible for deregistration. Be it Voluntary or compulsory, the companies need to understand the criteria and eligibility norms for the deregistration process. The businesses are advised to outsource their tax services to the best VAT consultancy firms in the UAE to get in-depth knowledge about each of these norms.

Compulsory VAT-Deregistration

The registered businesses become eligible for compulsory VAT deregistration when or the taxable supplies are less than the voluntary registration threshold limit.  In such cases, the company needs to compulsorily apply for VAT de-registration.

Voluntary VAT Deregistration

The businesses can opt for voluntary VAT deregistration if the taxable supplies for the past 12 months do not exceed the Compulsory VAT registration threshold of AED 375, 000 but are above the voluntary registration threshold of AED 187,500.

 How to Deregister for VAT in the UAE?

The companies opting for VAT deregistration are required to submit the application to the FTA. The necessary details and the reason for the deregistration should also be submitted. The FTA will verify the reason and if it is found to be valid then the authority will approve the voluntary deregistration. The FTA will also verify the following:

  1. Status of Returns
  2. Outstanding tax payments
  3. Any penalties that are pending

A pre-approval for VAT deregistration can be secured if the reason is valid. However, the final approval will be on hold until the outstanding payments are cleared.

Deregistration for VAT Groups

The eligibility for the VAT deregistration of VAT groups is the same as the criteria for the individual taxable entities. However, certain other criteria also apply to the VAT groups for applying for deregistration:

  1. The VAT deregistration will be approved if the group no longer meets the conditions to be considered as a VAT group
  2. The group could be granted deregistration if the constituent member companies are no longer financially associated with the group
  3. Deregistration will be approved if the FTA anticipates the tax status of the group may lead to tax evasion

VAT Consultants in the UAE

The taxable companies in the UAE apply for cancelling the VAT registration with the FTA for various reasons including the stoppage of producing taxable supplies or when the company ceases its operations. In such cases, it is crucial for companies to apply for VAT deregistration. The VAT-registered companies, however, need to understand when and how they should cancel their VAT registration. This is where a leading VAT consultancy firm like the Jitendra Chartered Accountants (JCA) comes into the picture. JCA’s well qualified chartered accountants offer exemplary services related to VAT in the UAE. JCA offers services like VAT registration, filing of VAT returns in compliance with the FTA regulations and guidelines and VAT deregistration. JCA’s tax agents help the clients complete allot e VAT-related requirements in time and prevent them from incurring penalties, thereby letting them do business with peace of mind.

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