Vat Deregistration
VAT Deregistration Services in the UAE
The unique thing about the UAE’s business climate is that it gives room for leaders to diversify their operations and allows them to start afresh. However, a change in business operations means that leaders have to reassess their VAT obligations and evaluate whether they have to proceed with the VAT deregistration process.
Most enterprises in compliance with the UAE VAT Laws are registered with the Federal Tax Authority. But if there is a shift in its operational model or if it has decided to take a new direction. The VAT deregistration process becomes critical for business leaders to notify the FTA. To help keep the local business ecosystem competitive and maintain its exclusivity, the law clearly sets an AED 375,000 threshold. If companies are unable to generate an annual taxable turnover of 375,000, the business may look at deregistering for VAT with the FTA.
following conditions:
- If it ceases making taxable supplies and is planning not to make any more in the ensuing year.
- If the taxable turnover is unable to meet the AED 187,500 mark within a year and is anticipating not to exceed the threshold in the next 30 days.
- If it is sold to new owners, the old owners would have to initiate the deregistration process.
- If the operations are restructured and merged with another entity, then both entities may need to deregister.
- A major shift in its legal structure that has an effect on its VAT registration status.
VAT Tax Deregistration: The General Processes That You Need To Know
The taxpayers are required to file for deregistration of VAT in the UAE within 20 days from the date of occurrence of any of the conditions as mentioned above. While the process might seem daunting, businesses often engage with VAT Deregistration consultants to help them file it.
Here are the six steps that every taxpayer has to follow:
- Submit the VAT Deregistration Application: Any taxpayer who is looking to deregister from the UAE VAT regime has to log in to their respective accounts on the FTA’s e-Services portal and provide all the necessary details.
- Provide Relevant Documents: Once they have provided the details, the taxpayer would be required to produce documentation in support of their request. The documentation may include:
- Proof of cessation of business operations
- Board resolutions approving UAE VAT deregistration
- Financial records reflecting a decline in the taxable turnover
- Any relevant documents required by the FTA
- FTA review: Once submitted, the FTA will vet the application and check if all the requirements are met and flag any concerns that it might have. If all concerns are met, the FTA will approve the application and move towards the next step.
- Final return: After reviewing, the FTA might open a VAT return file. This tax return represents the period that the taxpayer was registered with the FTA. The taxpayer should ensure that it is filed and any payable tax that is due should be settled within 28 days from the effective date of deregistration. Any gaps or failure to comply with the deadline can result in penalties and slow down the deregistration process further.
- Filing during deregistration: The process may take more time than usual. Taxpayers are expected to continue filing the VAT returns, including zero returns if applicable, for each tax period till the time the deregistration is approved.
- Deregistration Certification: After approving the deregistration, the FTA will provide a VAT Deregistration Certificate. This certificate will confirm that the company is no longer registered for VAT and will not be subject to VAT obligations like charging VAT or filing VAT returns.
Impact of VAT Deregistration
No Longer Charging VAT
Once deregistered, companies cannot charge VAT on the supplies they make.
Compliance and Reporting
Companies will not be expected to file periodic VAT returns or any applicable provisions of the VAT Act on recordkeeping
Reclaiming Input VAT
Businesses cannot file any claim on input VAT on materials they buy once they are deregistered.
Post-Deregistration Responsibilities
After the completion of the VAT deregistration, enterprises have to retain their VAT records for a period of five years as per the UAE tax regulations. Till the time the certificate is issued, enterprises often use this time to clear and settle any outstanding VAT liabilities and credits.
Penalty
To ensure compliance with the regulations, VAT-registered organisations have to file for deregistration within 20 days after the day it meets any of the conditions. If the deadline is missed, the following penalties may be applicable:
- Initial penalty of AED 1,000
- AED 1,000 for each month of delay
- A maximum penalty of AED 10,000
Potential Resubmission of VAT Registration
Whenever the enterprise’s circumstances take a positive turn and its taxable turnover breaches the VAT registration threshold, it is expected to reapply for VAT registration. The reapplication might have an impact on the existing operational process and accounting systems in place.
Hence, they have to do a clear assessment of their VAT position before they proceed with the deregistration.
To help them navigate through the process, there are firms that offer dedicated VAT deregistration support services. These VAT deregistration consultants would work closely and employ their experience to help avoid any costly mistakes and help smooth the transition process. Leveraging our expertise, Excellence can help you keep your operations in complete compliance with the UAE VAT regulations and tax laws.
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Frequently Asked Questions
With our proactive and client-centric approach to accounting services in Dubai and across the UAE, clients gain peace of mind knowing they are fully compliant and well-positioned for success in a dynamic regulatory landscape.
VAT deregistration is the process of cancelling a business's VAT registration with the Federal Tax Authority (FTA). It becomes necessary when a business no longer meets the criteria for VAT registration, such as when its annual turnover drops below AED 375,000, or if the business ceases to make taxable supplies.
A business must apply for VAT deregistration within 20 business days if:
- It ceases making taxable supplies and does not expect to make supplies in the next 12 months.
- Its taxable turnover drops below AED 187,500 in the last 12 months and is not expected to exceed this in the next 30 days.
- The business is sold, or there is a merger or acquisition.
To apply for VAT deregistration, log into the FTA’s e-Services portal and submit the online application with the required details. Supporting documents such as proof of revenue drop or cessation of business activities can be asked as a part of the VAT deregistration process. VAT Consultants and VAT advisors can help guide you through this process.
If a business fails to submit a VAT deregistration application within 20 business days, a penalty of AED 1,000 will be imposed, an additional charge of AED 1,000 will be incurred for each subsequent month of delay, capped at a maximum total of AED 10,000.
Yes, businesses must continue to file zero VAT returns for each tax period during the VAT deregistration process to avoid accumulating non-filing penalties. VAT consultants and VAT firms can assist with managing this process effectively.
Once the VAT deregistration application is approved, the FTA will issue a VAT deregistration certificate. This confirms that the business is no longer required to charge VAT or file VAT returns in UAE. However, the business must retain VAT records for up to five years.
No, once a business is deregistered for VAT, it cannot reclaim input VAT on purchases made after the deregistration. It’s important to consult with VAT consultants or VAT advisors to ensure that input VAT claims are fully utilized before applying for deregistration.
Even after deregistering for VAT, businesses must retain their VAT records for five years, as mandated by UAE tax laws. Businesses should also settle any outstanding VAT credits or balances before completing the VAT deregistration process.
Yes, in case the business meets the required registration threshold again, it must re-apply for the VAT registration. It is important for you to engage with a VAT firm or VAT consultant to determine if you meet the requirements.
VAT Consultancy Services, such as those offered by Excellence, can help businesses understand the VAT deregistration requirements, ensure VAT compliance, and guide them through the application process. VAT consultants and VAT firms ensure that your business remains compliant and avoids costly mistakes during the deregistration process.
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