VAT Deregistration in the UAE
  • August 04, 2023

VAT Deregistration in the UAE


Value Added Tax (VAT) was introduced in the United Arab Emirates (UAE) in 2018 as part of the government's efforts to diversify the economy and reduce its reliance on oil revenue. It is a consumption tax imposed on the supply of goods and services. The current VAT rate is 5%, which applies to most goods and services except for a few exempted items. 


Since its implementation in 2018, VAT registration has been mandatory for businesses whose annual taxable supplies and imports exceed AED 375,000. However, companies registered for VAT may encounter situations requiring VAT deregistration. 


While VAT registration is mandatory for eligible businesses, there may be situations where a company may need to deregister from VAT. Deregistration occurs when a business falls below the required registration threshold or ceases trading altogether.


Understanding VAT deregistration in the UAE is crucial for companies to remain compliant with the FTA regulations and maintain a healthy financial standing. In this blog post, we will discuss VAT deregistration, the steps involved in the deregistration process, and the implications of deregistration on the business's operations. 


What is VAT Deregistration?


VAT Deregistration, or VAT cancellation, is the process of cancelling a business's VAT registration with the Federal Tax Authority (FTA). It occurs when a business's taxable supplies and imports fall below AED 187,500 per annum or when a business permanently ceases its operations. VAT deregistration can also happen if a company fails to comply with the FTA's regulations, such as submitting its tax returns on time or keeping inaccurate records.


Here are some of the reasons businesses can consider VAT deregistration:

1. Voluntary Deregistration: A business can voluntarily apply for deregistration if its taxable supplies and expenses during the past 12 months or the next 30 days are expected to fall below the mandatory VAT registration threshold, which is currently set at AED 375,000.

2. Cessation of Business: If a business permanently ceases its activities or intends to cease within the next 30 days, it can apply for deregistration.

3. Transfer of Business: In case of a transfer or disposal of a business as a whole or part of a business, the registered person can apply for deregistration. The new owner or recipient of the transferred assets may need to register for VAT separately.

4. Change in Legal Status: If a business changes its legal structure, such as conversion from a sole proprietorship to a partnership or a company, it may require deregistration and subsequent registration under the new legal structure.


How to Cancel VAT Registration in UAE?

Businesses must follow the FTA's procedures to cancel VAT registration in the UAE. The process includes submitting the VAT deregistration form through the FTA's online portal. Businesses provide their TRN, the reason for deregistration, and the date they want to cancel their VAT registration.


 The FTA will verify the application and inform the industry if additional documentation is required. FTA will issue a deregistration certificate once the application is approved and the VAT registration is cancelled.


The following are the steps involved in a VAT Deregistration application:

a) Apply for VAT deregistration through your online account, including accurate reasoning and the effective date of deregistration and upload all necessary supporting documents.

b) Following the review of your deregistration application, submit your final VAT return as instructed by the FTA

c) Complete your outstanding liabilities with FTA, including any outstanding VAT liabilities and return any excess VAT credits.


If a business is deregistered, it means that the FTA has cancelled a business's VAT registration. It signifies that the industry is no longer obligated to charge VAT on its supplies or imports, nor is it eligible to claim any VAT credits. 


It is essential to note that the VAT deregistration process can take up to 20 days. Therefore, businesses should plan to avoid any disruptions to their operations.


VAT Deregistration Penalty UAE


Businesses that fail to comply with the FTA's VAT deregistration regulations may face penalties. For instance, companies that intentionally fail to deregister can be subject to a fine of AED 10,000. Additionally, businesses that continue to charge VAT after their deregistration can be subject to a penalty equal to the amount charged.


FTA VAT Deregistration


The Federal Tax Authority (FTA) is the regulatory body responsible for managing VAT registration and deregistration in the UAE. The FTA's regulations dictate when businesses are required to register and deregister for VAT and the penalties for non-compliance. Therefore, companies should adhere to FTA regulations to avoid penalties.


What is a Final Return? 

It is the return of the last tax period as a taxpayer under FTA. The final tax return ends on the effective date of deregistration approved by the Federal Tax Authority (FTA). The VAT return must be submitted, and the payable tax amount be settled within 28 days. 

How can Ascent Partners help?

Ascent Partners is a boutique consultancy providing bespoke, end-to-end corporate services ranging from company formation to accounting, bookkeeping, and compliance services for entrepreneurs looking to set up their next venture in the UAE. We work alongside to strategise, startup, and scale businesses in the UAE and the broader region.

With a combined experience of 50+ years, our expert consultants provide reliable and unparalleled guidance throughout all strategic phases of a business' evolution.