VAT Deregistration in the UAE: A Comprehensive Overview
VAT deregistration is a formal procedure that involves the cancellation of a business’s or individual’s VAT registration with the Federal Tax Authority (FTA) in the United Arab Emirates. This process is generally undertaken when certain predefined conditions stipulated in the UAE’s VAT legislation are met. Failure to comply with these conditions may result in the FTA rejecting the deregistration application.
It is crucial for taxable entities and individuals to understand that the process of VAT deregistration is as significant as the initial registration for VAT. Familiarity with the governing rules and procedures for VAT deregistration is essential, as non-compliance can lead to the imposition of administrative penalties. Specifically, failing to submit a deregistration application within the timeframe outlined in the tax law may result in financial repercussions.
Therefore, it is imperative for businesses and individuals to be well-versed in the criteria and timelines for VAT deregistration, in order to navigate the process efficiently and avoid potential penalties.
Eligibility Criteria for VAT Deregistration in the UAE
Introduction:
In accordance with the legal framework set forth by the Federal Tax Authority (FTA) of the United Arab Emirates, specific criteria must be met to apply for VAT deregistration. There are two primary categories under which an individual or business can deregister: Mandatory Deregistration and Voluntary Deregistration.
Mandatory VAT Deregistration:
An individual or a business must apply for mandatory VAT deregistration under the following conditions:
- Cessation of all transactions involving taxable goods and services, or
- The total taxable supplies or expenses for the preceding 12 months and the projected 30 days do not surpass the voluntary registration threshold of AED 187,500.
Should a business or individual, previously registered as a taxpayer with the FTA, satisfy either of these conditions, prompt application for VAT deregistration is obligatory to avoid penalties.
Compliance Time Frame:
Eligible entities have a time frame of 20 business days from the event triggering eligibility to submit their deregistration application. Failure to comply within this period will result in financial penalties.
Voluntary VAT Deregistration:
An individual or business that is registered for VAT may opt for voluntary deregistration if:
- They continue to engage in transactions involving taxable goods and services, but their total supplies or expenses for the past 12 calendar months fell below the mandatory VAT registration threshold of AED 375,000, and
- At least 12 calendar months have elapsed since the entity initially registered with the FTA under voluntary registration guidelines.
Under these circumstances, the entity is permitted to initiate the process for voluntary VAT deregistration. Unlike mandatory deregistration, there is no specific time constraint within which to apply for voluntary deregistration with the FTA.
It is advisable for entities to carefully assess their eligibility for deregistration and proceed accordingly to ensure compliance and avoid financial penalties.
How to De-Register for VAT in the United Arab Emirates: A Comprehensive Guide
The process of VAT de-registration in the UAE is streamlined and straightforward. Below is a step-by-step guide that outlines how to successfully complete the procedure.
Step 1: Access the FTA VAT Portal
Navigate to the Federal Tax Authority’s VAT portal and sign in using your credentials.
Step 2: Locate the De-Registration Option
Once logged in, click on the “De-Register” button found adjacent to your VAT registration information on the dashboard.
Step 3: Review Pre-filled Information
Your pertinent details will already be populated in the VAT de-registration application form. Ensure all the information is accurate.
Step 4: Specify Reason for De-Registration
Choose your rationale for VAT de-registration from the available drop-down menu options. These may include:
- Ceased business operations with no ongoing taxable supplies
- Engaging in taxable supplies but falling below the Voluntary Threshold
- Engaging in taxable supplies above the Voluntary Threshold but below the Mandatory Threshold
- Other (please specify the reason)
Step 5: Indicate Effective Date of De-Registration
The effective date from which you are eligible for de-registration will depend on the specific conditions tied to your de-registration request.
Step 6: Upload Supporting Documents
Click on the “Choose Files” button to attach all necessary supporting documents required for your application.
Step 7: Validate and Confirm Application
Review the application form carefully and confirm the authorized signature and declaration section before proceeding with submission.
Step 8: FTA Application Review
Upon submission, the Federal Tax Authority will evaluate your application. Once approved, your status will be updated to “Pre-approved.”
Step 9: Final Steps for Completion
To finalize the VAT de-registration process, you are required to submit your final VAT return and settle any outstanding tax liabilities.
By diligently following these steps, you can efficiently and effectively de-register for VAT in the UAE.
Application Submission Process
Upon the successful completion and electronic submission of the online application form, which includes all pertinent details and justifications, the applicant seeking VAT deregistration will receive an SMS confirmation on their registered mobile number.
Federal Tax Authority (FTA) Review
The Federal Tax Authority (FTA) will subsequently review the application, taking into consideration the reasons provided for deregistration, the status of any previous tax returns, and any outstanding penalties or tax payments. Should the application be in full compliance with FTA regulations and free of errors, approval will be granted, and the VAT registration will be officially canceled.
Effective Date of VAT Deregistration
VAT deregistration will take effect as of the conclusion of the last tax period during which the entity in question met the criteria for VAT cancellation.
VAT Deregistration Process for Business Groups
The procedure for VAT deregistration in the UAE is essentially the same for both individual entities and business groups. However, the criteria differ for groups that are VAT-registered. To qualify for VAT deregistration, a business group must meet the following conditions:
- The FTA will approve VAT deregistration for a group if the entity no longer satisfies the requirements to be classified as a group.
- The FTA may also grant VAT deregistration if the companies within the group are no longer financially linked.
- Proactively, the FTA may choose to cancel the VAT registration of a group if it determines that maintaining the group’s tax status could potentially facilitate tax evasion.
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