The implementation of Value Added Tax (VAT) in the UAE in January 2018 marked a pivotal change in the country’s tax framework, impacting businesses of all sizes. VAT has become an integral part of business operations, with businesses required to comply with registration obligations when their taxable supplies exceed AED 375,000 annually. VAT in UAE is governed by specific laws and regulations, requiring businesses to follow proper procedures for both registration and deregistration. However, there are circumstances where businesses may need to deregister for VAT, such as a decline in taxable supplies, cessation of taxable activities, or business closure.

In this comprehensive guide, we explore the VAT deregistration process in the UAE, from understanding the requirements to the application procedure. We’ll examine when and how businesses should apply for VAT deregistration, the steps involved, and the role of the Federal Tax Authority (FTA). When a business no longer meets the requirements for VAT registration, it must apply to the FTA to formally cancel the VAT registration. Additionally, we will discuss the mandatory registration threshold, which is the point at which businesses are required to register for VAT, and the VAT implications during the deregistration process.

Mistakes during the deregistration process can result in fines or delays, making it essential for businesses to follow the correct procedure. After deregistration, businesses are no longer permitted to levy VAT charges on their sales, which has direct implications for pricing and compliance. This guide will also highlight common errors and explain how working with experienced professionals can ensure smooth and compliant VAT deregistration, avoiding penalties and potential setbacks.

For businesses considering VAT deregistration, consulting with experts in VAT services can streamline the process, helping businesses comply with the Federal Tax Authority’s regulations while minimizing risks.

Understanding VAT Registration and Deregistration in the UAE

In the UAE, VAT registration is a mandatory requirement for businesses whose taxable turnover exceeds the annual threshold of AED 375,000. For businesses with taxable supplies under AED 187,500, voluntary registration is an option. A taxable person, which refers to any individual or business that is registered or required to register for VAT, must charge VAT on taxable supplies, file VAT returns, and remit the collected VAT to the Federal Tax Authority (FTA).

However, there are situations where businesses may need to undergo VAT deregistration. VAT deregistration is the process by which a business is removed from the VAT system when it no longer meets the criteria for VAT registration. This could be due to a decline in taxable turnover, the cessation of taxable activities, or the closure of the business. In such cases, businesses must deregister from VAT by submitting a VAT deregistration application to the FTA and following the procedures outlined by VAT law.

In addition to applying for deregistration, businesses must settle any outstanding liabilities and submit a final tax return. Failure to comply with these requirements can result in tax and administrative penalties. It is essential for businesses to understand the de registration process fully, including the procedural steps and legal provisions, to avoid complications and ensure that the process is completed smoothly and in compliance with VAT law.

VAT Registration in the UAE

For businesses operating in the UAE, VAT registration is a legal requirement if taxable supplies exceed the mandatory threshold. It allows businesses to collect VAT on their sales and ensure that they are compliant with VAT law. Businesses can use UAE Pass as a secure login method to access the EmaraTax portal and manage their EmaraTax account.

Who Needs to Register for VAT?

VAT registration is mandatory for businesses that exceed the AED 375,000 annual turnover threshold. Voluntary registration is available for businesses with taxable turnover between AED 187,500 and AED 375,000. If your business falls into this range, you may choose to register for VAT to reclaim input tax on business expenses. Businesses and individuals who meet these criteria are referred to as 'taxable persons' and are required to comply with VAT regulations.

Once VAT-registered, businesses are responsible for charging VAT on sales, submitting tax returns, and paying the VAT collected to the FTA. To register, businesses must complete an online application through the FTA’s EmaraTax account and provide details about their taxable activities, expected turnover, and tax registration number (TRN).

VAT Deregistration in the UAE

VAT deregistration is required when a business no longer meets the criteria for VAT registration. This can occur due to various reasons, such as taxable turnover falling below the registration threshold or the cessation of taxable activities. It is essential for businesses to notify the Federal Tax Authority (FTA) about their intention to deregister to avoid any tax penalties or legal complications. To officially cancel VAT registration, businesses must de register by following the prescribed procedures set by the FTA.

Reasons for VAT Deregistration

1. Reduction in Taxable Turnover:

A business is eligible for VAT deregistration if its taxable turnover falls below the AED 375,000 threshold over the past 12 months. This change in taxable income means the business is no longer required to maintain VAT registration.

2. Business Closure:

When a business is winding down or liquidating, VAT deregistration is necessary. The business must inform the FTA and complete the necessary steps to remove itself from the VAT system.

3. Change in Taxable Activities:

If a business has stopped making taxable supplies or changes its business activities such that VAT registration is no longer required, it must apply for VAT deregistration. This includes situations where the business model is altered in a way that excludes taxable supplies.

4. Sale of Business:

In the case of a business sale, the original owner must apply for VAT deregistration. The new owner, if required, will need to apply for VAT registration to comply with the FTA’s regulations.

In all these cases, businesses must submit a final tax return and settle any outstanding liabilities before the deregistration process is complete. Properly managing the VAT deregistration process is crucial to avoid penalties and ensure compliance with VAT law in the UAE.

The VAT Deregistration Process in the UAE

Deregistration from VAT is an official process that businesses must follow to ensure compliance with the Federal Tax Authority (FTA) when they no longer meet the VAT registration requirements. The process involves submitting an application through the FTA’s online portal, along with various documents and returns. Before applying, businesses must confirm that they are no longer making VAT supplies, as this is a key eligibility criterion for deregistration.

To begin the deregistration process in the EmaraTax portal, users should select the VAT tile. Each taxable person linked to the user's EmaraTax profile must be managed appropriately during the deregistration process. Below are the steps businesses need to take:

1. Check Eligibility for VAT Deregistration

Before proceeding with VAT deregistration, businesses must verify their eligibility. This involves confirming that they no longer meet the criteria for VAT registration, such as a decrease in taxable turnover, cessation of taxable activities, or business closure. If taxable turnover has dropped below the mandatory registration threshold of AED 375,000, or if the business has ceased making taxable supplies, deregistration may be necessary. If your business is eligible, the next step is to deregister VAT with the FTA by following the required process.

2. Submit the VAT Deregistration Application

The VAT deregistration application must be submitted via the FTA’s EmaraTax portal. The application requires key details about the business’s taxable activities, the reason for deregistration, and the date when taxable supplies ceased or dropped below the threshold. The documents required for the VAT deregistration application typically include a copy of the trade license, Emirates ID, passport of the authorized signatory, and supporting evidence showing cessation or reduction of taxable supplies. The submission of this application is the official first step in initiating the deregistration process.

3. File the Final VAT Return

Once the application has been submitted, businesses must file a final VAT return. This return should include all taxable supplies made up until the deregistration date, as well as any outstanding VAT liabilities. It is important to include and maintain VAT invoices as part of the documentation for the final VAT return, as these are essential for VAT compliance and may be required for audits or future reference. The final tax period should cover the period from the last VAT return filed up until the date the taxable activities ceased. Filing the final return ensures that all VAT obligations are settled before deregistration is processed.

4. Clear Outstanding VAT Liabilities

Before the FTA processes the deregistration request, businesses must clear any outstanding VAT liabilities, including unpaid VAT, penalties, or interest. This is essential to avoid delays in the deregistration process or potential rejection of the application. Any administrative penalties due to late filing or payment must also be addressed.

5. Await FTA Confirmation

Once the VAT deregistration application and final VAT return have been submitted, businesses will receive confirmation from the FTA. This confirmation, often in the form of a sealed official letter acknowledging the deregistration, signifies that the business has been successfully removed from the VAT system. It is essential for businesses to keep this confirmation for their records. As part of the post VAT deregistration process, businesses should use the reference number provided in the confirmation for any further communication with the FTA and ensure all final compliance steps are completed.

By following these steps, businesses can ensure a smooth VAT deregistration process and avoid administrative penalties or issues related to outstanding tax liabilities. Proper management of the deregistration process ensures compliance with VAT law in the UAE.

Step-by-Step Guide: How to Deregister for VAT in the UAE

Deregistering for VAT in the UAE is an essential process for businesses that no longer meet the VAT registration requirements. The following step-by-step guide will walk you through the procedure using the FTA’s EmaraTax system. It is important to note that late VAT deregistration can result in significant penalties if you miss the official deregistration deadline.

1. Login to EmaraTax Portal

First, log in to your registered EmaraTax account using your credentials. Once logged in, navigate to your business’s dashboard where you can access your VAT details.

2. Access the VAT Deregistration Request

In the VAT section of the portal, find and select the ‘VAT Deregistration’ option to begin the application process. This will open the form for VAT deregistration.

3. Complete the Deregistration Form

Fill out the required details about your business, including the reason for VAT deregistration (such as cessation of taxable activities or reduction in taxable turnover) and the date when taxable supplies ceased or dropped below the threshold. Ensure all information is accurate, as this will determine your eligibility for VAT deregistration under UAE VAT law.

4. Submit Final VAT Return

Before completing the deregistration process, you must submit a final VAT return. This should include all necessary details, such as VAT on stock, assets, and any outstanding liabilities. The return should reflect your taxable activities up until the deregistration date.

5. Confirm Deregistration

Once the FTA processes your deregistration request, you will receive confirmation that your VAT deregistration has been approved. This confirmation, often in the form of a sealed official letter, will acknowledge that your business has been officially removed from the VAT system.

6. Maintain VAT Records

After deregistration, businesses must continue to maintain VAT records for at least five years, as required by UAE VAT law. These records may be needed in case of an audit or if any VAT refunds are due. Your emara tax account will remain accessible after deregistration, but your VAT registration status in the account will be updated to indicate that you have been deregistered.

Following this process will help ensure that your VAT deregistration is completed smoothly and in compliance with UAE VAT regulations. By keeping accurate records and submitting all necessary documents, you can avoid complications during the deregistration process.

Common Mistakes During VAT Deregistration

Despite the straightforward nature of the VAT deregistration process, businesses often make several mistakes that can delay the approval of their deregistration application. Here are some of the most common errors to avoid:

🔹Incomplete or Inaccurate Documentation

Failure to submit all required documents, such as tax invoices or financial records, can lead to delays or rejection of the deregistration application.

🔹Not Settling VAT Liabilities

Businesses must clear all VAT liabilities before applying for deregistration. Unpaid VAT or interest can result in penalties or rejection of the application.

🔹Failure to Report VAT on Assets

Businesses must account for VAT on assets held at the time of deregistration. Failure to report these assets properly can lead to additional VAT liabilities.

🔹Delaying the Application

Businesses must submit their VAT deregistration application within 20 business days of becoming eligible. Delays can result in fines or penalties.

How Young & Right Can Assist with VAT Deregistration

Navigating VAT deregistration can be complex, especially for businesses unfamiliar with the regulations. Young & Right offers professional services to guide businesses through every step of the VAT deregistration process. Here’s how we can assist:

1. Complete Deregistration Process Management

From filing the deregistration request to ensuring all documentation is accurate, we manage the entire process for you.

2. Final VAT Return Filing

We assist in submitting the final VAT return, including any VAT due on stock or assets.

3. Consultation on VAT Liabilities

We provide expert advice on VAT on deregistration, ensuring that businesses meet all tax obligations regarding their assets.

4. Compliance Assurance

Our team ensures that your VAT deregistration application meets all FTA requirements, minimizing the risk of penalties or delays.

5. Record Keeping and Audit Support

We help maintain VAT records for the required five-year period, ensuring compliance with UAE tax law.

Conclusion

VAT registration and deregistration are critical processes for businesses in the UAE. Whether you're registering for VAT or deregistering due to a reduction in taxable supplies or business closure, understanding the steps involved is essential for compliance and avoiding penalties.

If you need assistance with VAT deregistration or have questions about VAT obligations, Young & Right can provide the expertise and support you need. Let us guide you through the deregistration process, ensuring that your business remains compliant with UAE tax law.