Expert VAT Deregistration Services for UAE Businesses

VAT deregistration in UAE is the process through which a business cancels its VAT registration with the Federal Tax Authority (FTA). This typically happens when a business no longer meets the VAT registration requirements, such as falling below the threshold for taxable turnover or ceasing taxable activities. Once deregistered, the business is no longer obligated to charge VAT on its goods or services.

VAT deregistration in UAE is categorized into two forms, voluntary and mandatory, each governed by specific eligibility criteria and compliance timelines. Here's a comprehensive look at both:

1. Voluntary VAT Deregistration

Businesses may choose to voluntarily deregister from VAT when maintaining VAT registration is no longer necessary or beneficial. This applies when:

• The business continues to make taxable supplies, but the annual taxable turnover has remained below AED 375,000 for the past 12 months.
• The business intends to stop making taxable supplies in the upcoming 12-month period.
• At least 12 months have passed since the business voluntarily registered for VAT.

Voluntary deregistration helps businesses reduce administrative efforts and compliance burdens. However, if the company still incurs significant VAT on purchases or expenses, remaining VAT-registered may be more financially advantageous. Importantly, there is no strict time limit for applying for voluntary deregistration. As long as the above conditions are met, businesses can apply when they deem appropriate.

2. Mandatory VAT Deregistration

Mandatory deregistration is required when a business no longer meets the minimum criteria for VAT registration as per UAE tax law. This occurs in two main situations:

• The business has ceased all taxable activities, such as closing down, merging, or shifting to non-taxable operations.
• The business’s taxable supplies or expenses have fallen below AED 187,500 over the past 12 months and are not expected to exceed this threshold in the next 30 days.

In such cases, the business must apply for deregistration within 20 business days from the date it becomes ineligible. Failing to meet this deadline results in a penalty of AED 10,000.

Not every business is eligible to cancel its VAT registration, and understanding the qualifying scenarios is key to remaining compliant with the Federal Tax Authority (FTA).

1. Businesses That Have Ceased Taxable Activities:

If your company has stopped supplying taxable goods or services—whether due to closure, restructuring, or a shift to non-taxable operations—you’re eligible for deregistration.

2. Businesses with Low Turnover

• If your taxable revenue falls below AED 187,500, you are required to apply for deregistration.
• If your taxable turnover is below AED 375,000 but above the mandatory threshold, you may choose to deregister voluntarily.

The following is designed to help you prepare the documentary requirements that you should have at hand to complete the application form:

Basis For Deregistration|Sub-Reason|Documents Required| |-------|------| Business no longer making taxable supplies|Cancellation of the license|Cancelled Trade license copy, liquidation letter, Board resolution|

Below are the templates that you may need to complete and upload as part of your online application:

1. Taxable Expenses
2. Taxable Supplies

Time Frame for UAE’s VAT Deregistration

1. Mandatory VAT Deregistration

• Apply within 20 business days from the point your business becomes ineligible for VAT registration.
• The 20-day window starts when your business no longer meets VAT requirements (e.g., cessation of taxable supplies or falling below the threshold).

Penalty Alert: If you miss this 20-day period, your business will face fines.

2. Voluntary VAT Deregistration

• No fixed deadline for voluntary deregistration.
• If your business meets the eligibility criteria, you can apply for deregistration at your discretion.

VAT deregistration in UAE can be intricate, and even minor missteps may lead to application rejections, penalties, or lost financial opportunities. Here’s a look at common mistakes businesses face and how ICB’s expert guidance ensures a smooth and compliant deregistration process.

1. Applying Without Meeting Eligibility Requirements

The Risk: Businesses often initiate deregistration without verifying if they meet the FTA’s criteria, such as having ceased taxable supplies or falling below the thresholds as specified by the FTA of AED 375,000 or AED 187,500.

ICB’s Solution: Our tax specialists conduct a comprehensive eligibility review to ensure you qualify before proceeding. If deregistration isn’t the right step yet, we advise on next steps to maintain compliance.

2. Skipping the Final VAT Return

The Risk: Many assume that once deregistration is submitted, they no longer need to file VAT returns. In reality, a final return and payment of any dues are mandatory before approval.

ICB’s Solution: We ensure your final VAT return is filed accurately and on time. Our team handles end-to-end submission, so nothing gets overlooked during the transition.

3. Leaving VAT Liabilities Unsettled

The Risk: Unpaid VAT dues will halt the deregistration process. Businesses mistakenly believe these can be settled afterward, but the FTA requires clearance before approval.

ICB’s Solution: We audit your tax records to identify and clear any outstanding liabilities. If needed, we help you coordinate with the FTA for structured settlement arrangements.

4. Submitting Incomplete or Incorrect Documentation

The Risk: Incorrect financials, missing proofs of ceased operations, or mismatched data from past filings can trigger delays or rejections.

ICB’s Solution: From compiling accurate documentation to reviewing every submission detail, we handle the paperwork meticulously to avoid discrepancies and speed up approval.

5. Missing Eligible VAT Refunds

The Risk: Once deregistration is finalized, any pending VAT refund claims become inaccessible, leading to lost entitlements.

ICB’s Solution: Before we initiate deregistration, we check for any refundable VAT amounts and process claims efficiently to ensure you receive what's owed.

6. Charging VAT After Deregistration

The Risk: Some businesses continue issuing VAT invoices post-deregistration, exposing themselves to hefty fines from the FTA.

ICB’s Solution: We assist in updating your billing systems and communications, ensuring your invoicing aligns with your deregistered status and avoids regulatory penalties.

7. Charging VAT After Deregistration

The Risk: Some businesses continue issuing VAT invoices post-deregistration, exposing themselves to hefty fines from the FTA.

ICB’s Solution: We assist in updating your billing systems and communications, ensuring your invoicing aligns with your deregistered status and avoids regulatory penalties.

After your VAT deregistration request is approved, it’s crucial to update your financial and tax records accordingly. Being aware of your post-deregistration responsibilities ensures you stay compliant with UAE tax laws and avoid future complications.

1. Updating Financial Systems:

Once deregistered, businesses need to adjust their accounting systems to halt VAT collection on sales and remove VAT charges from invoices. Any VAT-related entries in financial records should be reviewed and reconciled to ensure accuracy with past filings. For businesses that continue to operate, it’s important to classify new transactions properly as non-taxable to prevent future compliance issues. Working with accountants or tax advisors can ensure that these adjustments are made correctly.

2. Storing VAT Records for Future Reference:

Even after deregistration, businesses must retain VAT records for a minimum of five years, as required by UAE tax laws. The Federal Tax Authority (FTA) may request access to past filings, invoices, or financial statements for audits or compliance reviews. Keeping these records organized ensures businesses are prepared for any future inquiries or audits from the FTA. Additionally, securely storing VAT records helps maintain a clear financial history in case there’s a need to re-register for VAT in the future.

3. Reapplying for VAT Registration:

If a business exceeds the mandatory VAT registration threshold after deregistration, it must reapply for VAT registration with the FTA. Businesses should monitor their taxable income regularly to avoid non-compliance risks. If revenue surpasses AED 375,000, businesses must submit a new VAT registration application within 30 days to stay compliant. Having a clear strategy regarding VAT deregistration in UAE can help businesses make informed decisions and maintain proper tax compliance, whether they plan to remain VAT-free or need to re-register in the future.