How to do VAT De-Registration in UAE
By Alia Noor, FCMA, CIMA, MBA, Oxford fintech programme, GCC VAT Comp Dip,COSO Framework.
Associate Partner Ahmad Alagbari Chartered Accountants, UAE
WHAT IS VAT DE-REGISTRATION?
Tax De-registration is the provision for a registered taxable person to cancel his/her VAT registration with the Federal Tax Authority (FTA) . It means de-activation of the registration and the VAT number of the taxable person. Tax de-registration can be applied for by a person registered under VAT or done by the FTA on finding that a person meets the conditions for de-registration.
ELIGIBILITY FOR VAT DE-REGISTRATION
VAT deregistration in UAE is as important as registration for a VAT. There could be various reasons for canceling the registration for VAT in UAE.
De-registration reasons should comply with the conditions defined by the Law related to VAT. If the reasons are not valid and the conditions are not fulfilled, the FTA might reject the application for de-registration.
As per the current UAE VAT regulations that are set by the country’s tax authority, Federal Tax Authority in UAE, a business has to follow the conditions listed below in order to be eligible for VAT de-registration.
1-MANDATORY VAT DE-REGISTRATION:
A Registrant shall apply to the Authority for Mandatory Tax Deregistration in any of the following cases (as per Article 21 of the Decree-Law read with Article 14 of its Executive Regulation)
- If the business or a person stops making taxable supplies and does not expect to make any taxable supplies over the next 12-month period then they must apply for VAT Deregistration.
- If the value of the Taxable Supplies made over a period of 12 consecutive months is less than AED 187,500/- If the business or a person is still making taxable supplies but the value in the preceding 12 calendar months is less than the Voluntary Registration Threshold (AED 187,500) and said Registrant does not expect that the total value of taxable supplies and imports subject to reverse charge provisions or the expenses which are subject to tax that will be incurred, will not exceed AED 187,500/- during the coming 30-day period then they must apply for VAT Deregistration.
TIME FRAME FOR VAT DE-REGISTRATION
The registrant should apply for deregistration within 20 business days of the occurrence of the conditions mentioned above.
PENALTIES AGAINST NON DE-REGISTRATION
As per the guidelines issued by the Federal Tax Authority (FTA) on registration, amendments & Deregistration, if the date of submission of the de-registration form is more than 20 business days from the date the Taxable Person is required to de-register then, a late de-registration penalty of AED 10,000/- will be levied by the Federal Tax Authority.
VAT registrant in the UAE shall mandatorily verify as to whether they will fall in the categories specified in UAE VAT Law to avoid any non-compliance penalties.
2- VAT VOLUNTARILY DEREGISTRATION
A registered entity for VAT in UAE can deregister voluntarily if it meets any of the following:
- If the business or a person is still making taxable supplies but the value in the previous 12 months was less than the Mandatory Registration Threshold (AED 375,000) AND
- 12 months have passed since the date of registration if you were registered voluntarily then you may apply for VAT Deregistration.
Note that a person who has voluntarily registered under VAT cannot apply for de-registration in the 12 months following the date of registration.
TIME FRAME FOR VAT DE-REGISTRATION
There’s no specific deadline that has to be met to apply for deregistration for VAT (voluntarily) with the Federal Tax Authority.
DE-REGISTRATION FOR VAT GROUPS
The eligibility for the VAT deregistration of VAT groups is the same as the criteria for the individual taxable entities. However, certain other criteria also apply to the VAT groups for applying for deregistration:
- The VAT deregistration will be approved if the group no longer meets the conditions to be considered as a VAT group
- The group could be granted deregistration if the constituent member companies are no longer financially associated with the group
- Deregistration will be approved if the FTA anticipates the tax status of the group may lead to tax evasion
The companies that are closing down should upload their liquidation letter from authorities
PROCESS OF VAT DEREGISTRATION IN THE UAE
A registered entity should follow the below-mentioned procedures to cancel VAT registration in UAE:-
- Check they meet the criteria for the cancellation
- Log into their VAT Account on FTA Portal
- Fill in the vat deregistration form UAE online with the details along with the reason for the cancellation
- Submit the form electronically
- Receive SMS confirmation on the registered number for submission.
Subsequent to the submission of Application, the FTA will:-
- FTA will review the application and if they confirm the VAT De-registration the status of VAT De-Registration will be changed to ‘Pre-Approved’.
- After that the businesses have to submit final VAT Return Filing, after the last VAT Return filing the businesses must clear all the outstanding liabilities in order to complete the VAT Deregistration process.
- An email and an SMS notification of the status of the application and requesting you to complete the payment of the outstanding liabilities will be sent by FTA.
- If the VAT deregistration application is approved, only then the Federal Tax Authority will cancel the VAT registration of the registrant and will deregister with effect from the last day of the Tax Period during which the Registrant has met the conditions for deregistration or from such other date as may be determined by the Federal Tax Authority.
A Registrant shall not be deregistered unless he has paid all Tax and Administrative Penalties outstanding and filed all due Tax Returns under the Decree-Law and the Federal Law No. (7) of 2017 on Tax Procedures