Penalty For De-Registration of VAT In UAE

April 28, 2021Dated:  | |

When the business in the UAE cancels its VAT registration with the Federal Tax Authority (FTA) it is known as Deregistration of VAT. De-registration can be done by FTA if a person meets the conditions for de-registration. The procedures of the VAT deregistration must be familiar to the taxable firms because failure to apply will attract administrative penalties.

Eligibility for VAT De-registration

Tax De-registration can be applied by a person registered under VAT in the following three cases: 

  1. If a person stops making taxable supplies and does not expect to make any taxable supplies over the next one year period OR
  2. The person’s taxable supplies or taxable expenses incurred over a period of 12 consecutive months is less than the voluntary registration threshold (AED 187,500) and the person does not expects to cross this threshold in the next 30 days OR
  3. If taxable supplies are more than AED 187,500.00 (Voluntary Threshold) and less than AED 375,000.00(Mandatory threshold), the person can opt for deregistration if he wishes to.

Procedure to cancel VAT registration in UAE

The companies looking for VAT de-registration need to submit the application to the FTA along with the reasons and supporting documents for the same. If the reason is found valid, FTA will approve the request for the voluntary/mandatory deregistration as per your application. Following things will be double checked by FTA:

  • Status of Returns
  • Outstanding tax payments
  • Any penalties that are pending

If the reasons are convincing enough a pre-approval for VAT de-registration can be secured but the final approval will be on hold until the outstanding payments are cleared.

After the submission of Application, the FTA will

  • Will analyze the application for the reasons provided.
  • The status of returns will be analyzed.
  • If any pending penalties or tax payments are there will also be analyzed.
  • The application will be approved if everything is according to the rules and regulations.
  • De-register the VAT Registration.

VAT registration will be de-registered by The Federal Tax Authority with effect from the end date of the last tax period when the taxed body became eligible for the annulment of VAT.

However if one fails to apply for mandatory de-registration of VAT within the specified time-frame that is within 20 business days, from the occurrence of the event causing the tax payer entity to get eligible for tax de-registration the penalty is AED 10,000.

If you have any query related to de-registration of VAT in UAE then feel free to call +971 4 4542366 today for a quality consultation or please send inquiry to info[at]flyingcolour[dot]com.

Please Note: This article was published on 28th April 2021. The information provided in the article is based on the policies and rules applicable at the time of writing it. Talk to one of our consultants for any recent update or change.

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