VAT Deregistration in the UAE: Why and How

Value Added Tax (VAT) deregistration is the process by which a business formally cancels its registration with the UAE’s Federal Tax Authority (FTA). Deregistering may seem daunting, but it is a necessary step for businesses that no longer need or qualify for VAT registration. This guide covers the who, what, when, why, and how of VAT deregistration in the UAE, helping you understand the regulations and ensuring you remain compliant.

What Is VAT Deregistration

When a business deregisters from VAT, its Tax Registration Number (TRN) is deactivated. From that point, the business must stop charging VAT on its sales or claiming VAT on its purchases. Deregistration effectively removes the business from the UAE’s VAT system. Although many see registration as the initial “big step,” knowing when and how to deregister is equally important to avoid penalties and unnecessary admin.

Reasons to Deregister from VAT

There are two primary scenarios in which a business deregisters:

1. Mandatory Deregistration
   
   • If the business ceases trading or no longer makes taxable supplies.
   • If its taxable turnover falls below the voluntary registration threshold of USD 51,050 (AED 187,500) per year.
2. Voluntary Deregistration
   
   • If the business’s annual taxable turnover drops below the mandatory threshold USD 102,100 (AED 375,000) but remains above USD 51,050 (AED 187,500).
   • If the business has been registered for at least 12 months under voluntary registration and now wishes to cancel its TRN.

In both cases, the deciding factor revolves around turnover thresholds and business activity. If your figures dip below certain levels or the business closes entirely, deregistration becomes necessary or advisable.

Key Criteria and Thresholds

The UAE VAT legislation sets two main thresholds:

• USD 102,100 (AED 375,000): The mandatory registration (and deregistration) threshold. If your turnover is below this level, you can deregister voluntarily.
• USD 51,050 (AED 187,500): The voluntary registration (and mandatory deregistration) threshold. If you drop under this figure, you must deregister if it looks unlikely you will exceed it again in the coming months.

Should you close your business or liquidate your company, you must deregister regardless of turnover. Failure to follow the correct deregistration procedure can lead to penalties, so it is wise to ensure the process is handled correctly and on time.

How To Deregister From VAT In The UAE

Deregistering involves more than just submitting a single form. The procedure typically looks like this:

1. Log In to the FTA Portal
   Access the EmaraTax portal using your FTA credentials.
2. Start a Deregistration Application
   Within the “VAT Services” section, find the option to deregister. You will need to complete an online form explaining the reason for deregistration (e.g., “below threshold” or “ceased making taxable supplies”).
3. Provide Supporting Documents
   Examples include:
   • Trade licence cancellation (for a closed or liquidated company).
   • Financial statements demonstrating your turnover levels.
   • Proof of any business closures or employee deregistrations if applicable.
   • Evidence that any outstanding tax liabilities or penalties have been paid.
4. Review and Submit
   Double-check the information you have provided, then submit your application to the FTA. A pending status means the FTA is reviewing your request.
5. Final VAT Return
   If the FTA initially approves your request, you will be required to file a final VAT return. This covers the last period of trading up to the effective deregistration date. Any VAT due must be paid, and if you have outstanding input tax credit, you can request a refund.
6. Official Approval
   Once the final return is processed and all dues are cleared, the FTA confirms your deregistration. You can then download a deregistration certificate from the portal.

Timeframes and Deadlines

• You must apply to deregister within 20 business days of becoming eligible (e.g., ceasing activities or falling below the threshold).
• The FTA typically reviews deregistration applications within around 20 working days, though it can take longer if further information is needed.
• The final VAT return is due within 28 days from your deregistration effective date, unless the FTA specifies a different deadline.

Prompt action is essential. Delays can trigger penalties of up to USD 2,722 (AED 10,000) if you miss the 20-day submission window.

Post-Deregistration Compliance

Once deregistered, your TRN becomes invalid and you must not:

1. Charge VAT on any subsequent sales.
2. Claim input tax on costs.

However, you must keep your records for at least five years following deregistration (and up to 15 for certain real estate records). The FTA may conduct audits or reviews, and you must be able to produce historical invoices and returns if requested.

How To Avoid Fines And Penalties

Late Deregistration: Missing the 20-business-day window can lead to a hefty fine of up to USD 2,722 (AED 10,000).
Non-Filing of Returns: Until the FTA confirms your deregistration, you must continue filing periodic returns. Failing to do so can result in penalties for late submission, even if your sales are zero.
Outstanding Liabilities: If you owe the FTA any tax or penalties, your deregistration cannot be finalised until these have been settled in full.

Staying on top of your VAT obligations, tracking turnover, and applying at the correct time helps you avoid these problems.

Legal Framework

UAE VAT deregistration is governed by:

• Federal Decree-Law No. 8 of 2017 on VAT (Articles 21–24).
• Cabinet Decision No. 52 of 2017 (Executive Regulations).
• FTA Decisions on administrative penalties, including the requirement to apply for deregistration within 20 business days.

Keeping abreast of any updates to the legislation and checking official FTA guidance helps ensure your information remains accurate and up to date.

Final Thoughts

VAT deregistration is a straightforward yet regulated process. If your business is no longer making taxable supplies, or if it falls below the mandatory threshold, you may be able or required to deregister. Likewise, if you close your business or wind up operations, deregistering is a legal necessity, not just a formality.

The key is to follow the required steps carefully, remain compliant with record-keeping obligations, and file any outstanding returns. By understanding the process and meeting deadlines, you will save your business from unnecessary fees and ensure a smooth exit from the VAT system.

If you are unsure whether your business is eligible or if you have complicated circumstances (such as partial closures, VAT groups, or significant stock on hand), consider seeking advice from tax professionals or consulting the Federal Tax Authority’s official guidelines.

Remember: timely and accurate deregistration is just as important as getting VAT registration right in the first place.

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