What is VAT Deregistration in the UAE? A Complete Guide

Introduction

VAT deregistration is an essential process for businesses in the UAE that no longer meet the criteria for VAT registration. Whether due to a decline in taxable turnover, business closure, or structural changes, VAT deregistration allows businesses to legally remove themselves from the Federal Tax Authority (FTA) VAT system. Understanding when and how to apply for VAT deregistration is crucial to ensure compliance with UAE tax laws and avoid unnecessary penalties. In this blog, we’ll provide a comprehensive guide to VAT deregistration, including its purpose, eligibility criteria, and key considerations for businesses.

What is VAT deregistration?

VAT deregistration is the official process of canceling a business’s VAT registration with the FTA. Once deregistered, the business is no longer required to file VAT returns or charge VAT on goods and services. Businesses may opt for VAT deregistration due to several reasons, including:

• Ceasing business operations

• Falling below the mandatory VAT threshold

• Changing business structure or ownership

VAT deregistration must be approved by the FTA, and businesses must settle any outstanding VAT liabilities before their deregistration request is granted.

Why is VAT deregistration Important?

1. Ensures Tax Compliance

• Businesses that no longer meet VAT registration requirements must deregister to comply with UAE tax laws.

• Failing to deregister when eligible can result in penalties and compliance issues.

2. Avoids Unnecessary VAT Liabilities

• Once deregistered, businesses are no longer required to charge or collect VAT.

• This prevents unnecessary VAT obligations and reduces administrative burdens.

3. Helps in Business Restructuring

• Companies undergoing mergers, acquisitions, or closures may need to deregister for VAT.

• Proper VAT deregistration ensures that the business structure is legally and financially aligned.

Who is Eligible for VAT deregistration in the UAE?

Businesses in the UAE can apply for VAT deregistration if they meet any of the following criteria:

1. Business Ceases to Exist

• If a company permanently stops operations, it must apply for VAT deregistration.

2. Taxable Turnover Falls Below the Mandatory Threshold

• Businesses must deregister if their annual taxable turnover drops below AED 187,500 (voluntary deregistration threshold).

• If turnover falls below AED 375,000 but is above AED 187,500, businesses can choose to remain registered or apply for deregistration.

3. Business Undergoes Structural Changes

• If a business undergoes a merger, acquisition, or ownership change, VAT deregistration may be required.

• A new entity may need to apply for VAT registration separately.

The VAT deregistration Process in the UAE

The FTA has set clear guidelines for VAT deregistration, and businesses must follow the correct steps to ensure successful deregistration.

Step 1: Log in to the FTA Portal

• Businesses must log in to their FTA e-Services account.

• Navigate to the VAT deregistration section under the VAT dashboard.

Step 2: Submit the VAT deregistration Application

• Fill out the VAT deregistration Form with details such as:

• Business trade license details

• Reason for VAT deregistration

• Last VAT return details

• Supporting documents (e.g., business closure proof, financial records)

Step 3: Settle Any Outstanding VAT Liabilities

• Before deregistration is approved, businesses must:

• Submit all pending VAT returns

• Pay any outstanding VAT dues or penalties

Step 4: Await FTA Approval

• The FTA will review the application and determine if the business is eligible for VAT deregistration.

• If approved, the VAT registration number will be deactivated, and the business will no longer be required to file VAT returns.

Common Challenges in VAT deregistration

Many businesses face difficulties when applying for VAT deregistration due to errors or missing information. Here are some common issues:

1. Failure to Settle Outstanding VAT Dues

• Unpaid VAT liabilities or pending returns can delay or prevent VAT deregistration approval.

Solution:

• Ensure all VAT returns are filed and outstanding amounts are settled before applying.

2. Incorrect Documentation Submission

• Submitting incomplete or incorrect information can result in application rejections.

Solution:

• Verify that all business details, financial statements, and supporting documents are accurate.

3. Delayed Processing Times

• Businesses may experience delays in VAT deregistration approvals due to processing backlogs.

Solution:

• Apply early and track the status of the application regularly.

How Young and Right Can Help

At Young and Right, we provide expert VAT deregistration services to help businesses navigate the FTA process smoothly and avoid common deregistration pitfalls.

1. VAT Compliance and Eligibility Assessment

• We assess your business to determine if you meet the VAT deregistration criteria.

• Our tax specialists review your financial records and ensure full compliance with VAT laws.

2. VAT deregistration Application Support

• We assist in preparing and submitting your VAT deregistration application.

• Our team ensures that all business details and supporting documents meet FTA requirements.

3. Settling VAT Liabilities and Final Tax Filings

• We calculate outstanding VAT dues and help businesses settle them before deregistration.

• Our tax consultants ensure all pending VAT returns are filed correctly.

4. FTA Communication and Approval Process

• We liaise with the FTA to track the progress of your VAT deregistration application.

• Our team addresses any FTA queries and ensures a smooth approval process.

5. Post-Deregistration Advisory Services

• We provide post-deregistration guidance, ensuring businesses stay compliant even after VAT deregistration.

• Our experts offer VAT impact assessments for restructuring or business closure.

With Young and Right, businesses can successfully deregister for VAT without delays or compliance risks.

Conclusion

VAT deregistration is a critical step for businesses in the UAE that no longer meet VAT registration criteria. Whether due to business closure, structural changes, or a decline in taxable turnover, companies must follow the correct FTA deregistration procedures to avoid penalties. By ensuring all VAT returns are filed, liabilities are settled, and proper documentation is submitted, businesses can streamline their VAT deregistration process. At Young and Right, we provide specialized VAT deregistration services to help businesses navigate the FTA process with ease. From assessing eligibility to handling FTA approvals, our expert team ensures a hassle-free VAT deregistration experience. For trusted VAT consulting in the UAE, choose Young and Right—your reliable partner in VAT Compliance and tax solutions.