Common Mistakes to Avoid During VAT Deregistration

VAT deregistration in the UAE is a structured process that requires accurate documentation, compliance with Federal Tax Authority (FTA) regulations, and proper Financial Reporting. Many businesses face challenges during deregistration due to errors in applications, missing records, or failing to meet FTA requirements, which can result in delays, fines, or rejection of the deregistration request. In this blog, we will highlight the most common mistakes businesses make during VAT deregistration and provide practical solutions to ensure a smooth and penalty-free process.

Why VAT deregistration Must Be Done Correctly

VAT deregistration is not just about ceasing VAT collection; it also involves final tax settlements, record maintenance, and compliance checks. Businesses that fail to follow the correct procedures may:

• Face FTA penalties for non-compliance.

• Experience delays in deregistration approval.

• Be subject to future Tax audits and liabilities.

• Miss out on VAT refunds that they may be eligible for.

By avoiding common mistakes and ensuring proper compliance, businesses can successfully deregister without facing unnecessary financial and legal consequences.

Common VAT deregistration Mistakes and How to Avoid Them

1. Filing for Deregistration Without Meeting Eligibility Criteria

Mistake: Some businesses apply for VAT deregistration without checking if they meet the FTA’s eligibility requirements. Businesses are only eligible for VAT deregistration if:

• Their annual taxable turnover falls below AED 187,500 (voluntary deregistration).

• They cease taxable supplies and will no longer conduct business.

• The business is closing down or being liquidated.

How to Avoid It:

• Verify your eligibility before submitting a deregistration request.

• If you are unsure, consult a VAT expert to determine whether your business qualifies for deregistration.

2. Failing to Submit a Final VAT Return

Mistake: Many businesses assume that once they apply for VAT deregistration, they no longer need to file VAT returns. However, before deregistration is approved, businesses must:

• Submit a final VAT return.

• Declare all outstanding VAT liabilities.

• Pay any remaining VAT dues to the FTA.

How to Avoid It:

• Ensure that all previous VAT returns are submitted before applying for deregistration.

• File your final VAT return and pay any outstanding VAT dues within the deadline.

3. Not Settling Outstanding VAT Liabilities

Mistake: Some businesses apply for deregistration while still having unpaid VAT liabilities, assuming they can settle them later. The FTA will not approve deregistration until all VAT dues are cleared. How to Avoid It:

• Before applying, review your tax records and ensure all outstanding VAT payments are cleared.

• If you owe VAT but cannot pay immediately, consult a VAT consultant for assistance with payment arrangements.

4. Incorrect or Incomplete Documentation

Mistake: Providing incorrect or incomplete documents during the deregistration process is one of the most common reasons for rejection. Businesses often:

• Submit incorrect financial statements.

• Fail to include supporting documents for ceased business operations.

• Provide inconsistent information that does not match previous VAT filings.

How to Avoid It:

• Double-check all submitted documents before applying for VAT deregistration.

• Ensure that financial records match previously filed VAT returns.

• Seek professional VAT advisory services to verify your paperwork.

5. Missing VAT Refund Opportunities

Mistake: Some businesses fail to claim eligible VAT refunds before deregistering, leading to financial losses. Once deregistration is finalized, businesses cannot claim VAT refunds. How to Avoid It:

• Check if you are eligible for any VAT refunds before submitting deregistration.

• If applicable, file your VAT refund request first and wait for approval before proceeding with deregistration.

6. Continuing to Charge VAT After Deregistration

Mistake: Once a business is deregistered, it can no longer charge VAT on sales. However, some companies mistakenly continue issuing VAT invoices after deregistration, leading to FTA penalties. How to Avoid It:

• Update your invoicing system immediately after deregistration approval.

• Inform customers and suppliers that you are no longer registered for VAT.

7. Not Keeping VAT Records for Five Years

Mistake: Some businesses believe that after deregistration, they no longer need to keep VAT records. However, the FTA requires businesses to maintain VAT records for five years, even after deregistration. How to Avoid It:

• Store all VAT records, invoices, and financial statements securely for five years.

• Ensure all records are organized and easily accessible in case of future audits.

How Young and Right Can Help

VAT deregistration requires careful planning, compliance with FTA regulations, and accurate financial documentation. At Young and Right, we specialize in VAT services to help businesses navigate the deregistration process smoothly while avoiding costly mistakes.

1. VAT deregistration Consultation and Compliance Support

• We assess your eligibility for VAT deregistration and ensure you meet FTA requirements.

• Our team reviews your financial records to confirm that all VAT obligations are met.

• We provide guidance on post-deregistration responsibilities to ensure continued compliance.

2. Assistance with Final VAT Returns and Tax Settlements

• We help businesses file final VAT returns accurately and on time.

• Our experts calculate outstanding VAT liabilities and assist in settling tax dues.

• We ensure businesses avoid fines and delays by meeting all FTA tax obligations.

3. Error-Free Documentation and Application Submission

• Our VAT specialists prepare and verify all required documents before submission.

• We handle FTA communications and respond to queries on your behalf.

• We ensure that your deregistration request is processed efficiently and without errors.

4. VAT Refund Assistance for Deregistering Businesses

• We assess whether your business is eligible for VAT refunds before deregistration.

• Our team prepares and submits VAT refund applications to maximize your tax recovery.

• We ensure refunds are processed before deregistration approval, preventing financial losses.

5. Post-Deregistration VAT Record-Keeping and Audit Support

• We guide businesses in maintaining VAT records for five years as per FTA rules.

• Our experts prepare businesses for potential post-deregistration audits.

• We offer long-term VAT advisory services to ensure ongoing compliance.

With Young and Right, businesses receive end-to-end VAT deregistration support, ensuring a hassle-free process while minimizing financial and legal risks.

Conclusion

VAT deregistration is a regulated process that requires businesses to submit accurate documents, clear outstanding VAT liabilities, and follow compliance requirements. Many businesses face delays, fines, or rejected applications due to common mistakes such as missing VAT payments, incorrect documentation, or failing to claim VAT refunds. By avoiding these pitfalls and ensuring proper compliance, businesses can successfully deregister without financial or legal complications. At Young and Right, our VAT experts provide comprehensive VAT deregistration support, from filing final returns and settling liabilities to ensuring FTA compliance and post-deregistration record-keeping. Partner with us for a smooth VAT deregistration process, and avoid unnecessary penalties or tax disputes. For expert VAT deregistration services in the UAE, trust Young and Right—your dedicated tax advisory partner.