VAT De-registration: When Should You De-register Your Company in the UAE

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To curb the dependency of the United Arab Emirates (UAE) on oil and other hydrocarbons and as a source of revenue and to help provide better public services to its citizens, the UAE Government introduced Value Added Tax (VAT) on the 1st January 2018.

All businesses trading in taxable supplies and imports exceeding AED 375,000 per annum must register for VAT. However, business entities dealing with and selling taxable supplies and imports that do not exceed AED 187,500 per year are not required to register for VAT. 

It is good to note here that it is not always feasible for a business to be VAT registered as such a registration makes the final product more expensive for the buyers. Hence, they may need to de-register as they continue to operate their business in the UAE.

Continue reading to know when a company should de-register for VAT.

What is VAT De-registration in UAE?

A VAT registered business in the UAE collects VAT (tax amount payable) from its customers and pays to the UAE Government. However, for specific reasons, as discussed later in the article, the business may stop collecting the same either voluntarily or mandatorily. The term that describes such a withdrawal is VAT deregistration.

When Should A Company De-Register For VAT in the UAE?

VAT registration is mandatory in the following scenario:

  1. The VAT registered business is aware that it will undergo a change that could affect it from functioning in the future and may not deal with taxable supplies. That is generally the case when the business voluntarily liquidates.
  2. A company whose turnover drops below the taxable threshold of AED 187,500 in the eleven months of its operations and does not expect to do so in the following 30 days may apply for VAT deregistration.

How to Apply for VAT Deregistration in the UAE?

The VAT registered business may apply for VAT de-registration by submitting the relevant application to the Federal Tax Authority (FTA) and the necessary documents proving the clearance of all tax liabilities. 

The FTA acknowledges the submission of the applications and accepts if it is satisfied with the authenticity of the documents and will cancel the TRN.

Special Considerations for Voluntary VAT Deregistration in UAE

Suppose the business turnover drops below the mandatory taxable threshold of AED 375,000 but stays above AED 187,500 and does not expect to recover in the following 30 days, they may voluntarily de-register from VAT.

If a VAT registered business did so voluntarily, it could apply for similar de-registration in one or more of the situations mentioned earlier. However, the FTA will allow it to deregister from VAT only after the passing of 12 months from the VAT registration date.

Conclusion

VAT registered business houses can apply for VAT deregistration directly through the FTA portal within 20 working days, failing which they must face a penalty to the tune of AED 10,000. It is better to provide accurate and authentic documentation to support the VAT deregistration application. If the FTA does not find the documents satisfactory, they will not approve the VAT deregistration. 

VAT registered businesses who opt for voluntary VAT deregistration must be cautious. When the FTA reviews the application, it scrutinizes certain areas, such as the VAT returns, tax liability clearance, and pending administrative penalties.

Flyingcolour can help you timely submit the complex documentation to support your VAT deregistration application to avoid FTA rejection.

Book your free consultation with us to know more about the comprehensive services.   

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