VAT Deregistration for Liquidated Businesses: What You Need to Know

When a business in the UAE undergoes Liquidation, it must deregister from Value Added Tax (VAT) with the Federal Tax Authority (FTA). Failure to complete VAT deregistration on time can result in penalties, ongoing tax liabilities, and compliance issues. Understanding the VAT deregistration process for liquidated businesses is essential to ensure a smooth closure without financial or legal complications. This blog outlines the VAT deregistration process for liquidated businesses, key requirements, and how to avoid penalties while closing operations in compliance with UAE tax laws.

Why Liquidated Businesses Must Apply for VAT deregistration

VAT-registered businesses that are undergoing Liquidation or ceasing operations are required to deregister for VAT to close their tax obligations. According to FTA regulations, a company must apply for VAT deregistration within 20 business days of ceasing taxable activities.

Key Reasons for VAT deregistration in Liquidation

A business undergoing Liquidation must deregister for VAT due to:

• Termination of Operations – If a company ceases all taxable supplies, it no longer needs to be VAT-registered.

• Legal Liquidation Process – Companies undergoing legal Liquidation or dissolution must complete tax deregistration to finalize closure.

• VAT Compliance – Businesses must clear outstanding VAT payments and submit final tax returns before closing operations.

Step-by-Step VAT deregistration Process for Liquidated Businesses

The VAT deregistration process for liquidated businesses involves several steps to ensure proper closure with the FTA.

1. Prepare Required Documentation

Before submitting the deregistration application, businesses must gather the following documents:

• VAT registration certificate

• Company trade license

• Liquidation letter issued by a registered liquidator

• Final financial statements detailing business closure

• Proof of outstanding VAT payments or VAT refunds (if applicable)

• Final VAT return submission confirmation

2. Submit the VAT deregistration Application

• Log in to the FTA e-Services Portal and access the VAT deregistration request form.

• Complete the application by providing business details, reason for deregistration, and required supporting documents.

• Submit the request within 20 business days from the date of Liquidation.

3. Settle Outstanding VAT Liabilities

• The FTA will review outstanding tax obligations before approving the deregistration request.

• Businesses must clear any unpaid VAT dues, penalties, or tax refunds before the deregistration process is finalized.

• If a business is eligible for a VAT refund, the FTA will process the refund before deregistration is confirmed.

4. Final VAT Compliance Check by the FTA

• The FTA may request additional documents or conduct an audit to verify tax compliance.

• If all tax obligations are met, the FTA will approve the deregistration request and cancel the VAT registration.

5. Confirmation of VAT deregistration

• Once approved, businesses receive a VAT deregistration confirmation certificate from the FTA.

• The company is officially deregistered and no longer required to file VAT returns or charge VAT on supplies.

Common Challenges During VAT deregistration for Liquidated Businesses

Businesses undergoing VAT deregistration for Liquidation often face challenges that can delay the process or result in penalties. Here are some common issues and how to avoid them:

1. Late VAT deregistration Application

• Businesses must apply for deregistration within 20 business days of Liquidation.

• Late applications result in an AED 10,000 penalty imposed by the FTA.

2. Unsettled VAT Liabilities

• Failure to clear outstanding VAT dues before deregistration delays approval.

• Businesses should ensure all tax payments are completed before submitting the deregistration request.

3. Missing Liquidation Documents

• A registered liquidator must issue a Liquidation certificate for VAT deregistration approval.

• Businesses must ensure all legal and financial documents are submitted correctly.

4. VAT Refund Delays

• If a business is eligible for a VAT refund, processing times may delay deregistration approval.

• Businesses should submit refund requests before applying for deregistration to avoid delays.

How to Avoid VAT deregistration Penalties for Liquidated Businesses

To ensure a smooth and penalty-free VAT deregistration process, businesses should follow these key practices:

1. Apply for Deregistration on Time

• Submit the VAT deregistration request within 20 business days of business Liquidation.

• Late submission results in a fixed penalty of AED 10,000 from the FTA.

2. Settle All VAT Liabilities

• Pay any outstanding VAT dues, fines, or penalties before submitting the deregistration application.

• Ensure that the final VAT return is submitted before closure.

3. Maintain Accurate VAT Records

• Keep proper VAT records, including tax invoices, VAT returns, and financial statements.

• The FTA may request past VAT filings before approving deregistration.

4. Work with a Professional VAT Consultant

• VAT experts help businesses navigate the deregistration process, prepare documents, and ensure compliance.

• Professional assistance reduces the risk of delays, penalties, and VAT filing errors.

How Young and Right Can Help

Deregistering for VAT during business Liquidation can be complex and time-sensitive. At Young and Right, we specialize in VAT deregistration services for liquidated businesses, ensuring a smooth, compliant, and penalty-free process.

1. End-to-End VAT deregistration Management

• We handle all aspects of VAT deregistration, from application submission to final approval.

• Our team ensures that all required documents are prepared and submitted correctly.

2. VAT Compliance and Penalty Prevention

• We assist in settling outstanding VAT liabilities and filing the final VAT return before deregistration.

• Our services help businesses avoid late submission penalties and unnecessary tax disputes.

3. Financial Statement and Liquidation Documentation Support

• We work with liquidators to ensure accurate financial records are prepared for deregistration.

• Our team helps businesses compile all necessary Liquidation reports for FTA approval.

4. VAT Refund Assistance for Liquidated Businesses

• If a business is eligible for a VAT refund, we assist in filing refund claims and ensuring they are processed before deregistration.

• We handle all communications with the FTA to expedite refund approvals.

5. Ongoing VAT Advisory and Support

• We provide businesses with post-deregistration VAT Compliance guidance.

• Our consultants offer strategic VAT planning to help businesses transition smoothly out of tax obligations.

With Young and Right, businesses can ensure hassle-free VAT deregistration, comply with UAE tax regulations, and avoid costly penalties.

Conclusion

Liquidated businesses in the UAE must apply for VAT deregistration within 20 business days of ceasing operations. Failure to deregister on time can result in a penalty of AED 10,000, ongoing tax obligations, and potential delays in the Liquidation process. To ensure a smooth and penalty-free VAT deregistration, businesses should: Submit the deregistration request on time to avoid fines. Settle all VAT liabilities before applying for deregistration. Maintain accurate tax records to comply with FTA requirements. Seek professional VAT consultation for a seamless transition. At Young and Right, we provide expert VAT deregistration services to help liquidated businesses navigate the process efficiently, comply with tax regulations, and avoid penalties.