Value Added Tax (VAT) in the UAE was introduced in January 2018 as part of the government's efforts to diversify revenue streams. As businesses navigate VAT laws, there may be scenarios where VAT deregistration becomes necessary. VAT deregistration is the process of canceling a company’s VAT registration with the Federal Tax Authority (FTA) in the UAE. While registration is a legal obligation for eligible businesses, deregistration is also bound by specific regulations.

In this blog, we’ll dive deep into the VAT deregistration process, the reasons behind it, how it works, and how Tulpar Global Taxation can assist businesses in managing this process smoothly.

What is VAT Deregistration?

VAT deregistration is the formal process of canceling a company’s VAT registration with the FTA when a business no longer meets the criteria for being VAT-registered. Once deregistered, the business is no longer obligated to charge VAT on goods and services or file regular VAT returns.

Reasons for VAT Deregistration

There are two primary reasons why a business may need to deregister for VAT:

1. Mandatory VAT Deregistration: This occurs when a business no longer qualifies for VAT registration. There are specific conditions for mandatory deregistration:

   • The business ceases to make taxable supplies (i.e., the company no longer sells goods or services that require the collection of VAT).
   • The total value of taxable supplies and imports in the preceding 12 months is below the voluntary registration threshold of AED 187,500.

   Failure to deregister in a timely manner can lead to penalties imposed by the FTA.

2. Voluntary VAT Deregistration: A business can voluntarily deregister if the total value of taxable supplies and imports in the previous 12 months falls below the mandatory registration threshold of AED 375,000 but exceeds the voluntary threshold of AED 187,500. In this case, deregistration is optional but allowed.

Who Should Consider VAT Deregistration?

Businesses that should consider VAT deregistration include:

• Businesses Ceasing Operations: Companies that are closing down and no longer carrying out any taxable activity.
• Businesses Below Threshold: Those whose annual taxable supplies and imports have fallen below the required threshold.
• Businesses Requiring Simplification: In some cases, companies may voluntarily choose deregistration to reduce the administrative burden associated with VAT compliance, particularly if their revenue from taxable activities has significantly decreased.

The VAT Deregistration Process

VAT deregistration is not an automatic process and requires businesses to apply through the FTA’s portal. Here’s how the process works:

1. Submission of Application: The business must submit an application for VAT deregistration via the FTA's e-Services portal. This application must include accurate and complete information, detailing why deregistration is necessary.

2. FTA Review: The FTA reviews the application to ensure the business meets the criteria for deregistration. They may ask for supporting documents or further clarification regarding the request.

3. Approval or Rejection: If the FTA approves the application, the business will be deregistered, and the VAT account will be canceled. However, if the FTA rejects the application, the business remains VAT-registered and must continue to comply with VAT obligations.

4. Final VAT Return: Upon deregistration, the business must submit a final VAT return, settling any outstanding VAT liabilities. This ensures that the business has fully complied with all VAT obligations before deregistration is complete.

VAT Deregistration Penalties

Businesses that fail to deregister in time may face penalties. According to the FTA, if a business is required to deregister but fails to do so within 20 business days of meeting the deregistration criteria, the company may face a penalty of AED 10,000.

Additionally, any outstanding VAT liabilities, such as unpaid VAT or improperly filed VAT returns, will need to be settled before the deregistration process is completed.

Common Challenges in VAT Deregistration

The VAT deregistration process can be complex, and businesses often encounter several challenges, including:

1. Understanding Eligibility: Determining whether a business is eligible for deregistration can be tricky, especially if the company operates across multiple sectors or has fluctuating revenue.

2. Timely Submission: Failing to apply for deregistration within the prescribed time frame can result in penalties. Many businesses struggle to keep track of deadlines and ensure timely submission.

3. Accurate Documentation: The FTA requires detailed and accurate documentation as part of the deregistration application. Businesses may need to provide supporting documents related to revenue, expenses, and taxable supplies, and any inaccuracies can lead to delays or rejection.

4. Outstanding Liabilities: Any unpaid VAT or improperly filed VAT returns must be resolved before deregistration. This requires careful financial management and reconciliation of VAT accounts.

How Tulpar Global Taxation Can Help

Tulpar Global Taxation offers specialized VAT services, including VAT deregistration, to help businesses navigate this process smoothly. Our experienced team of tax professionals provides end-to-end support, ensuring that businesses:

1. Assess Deregistration Eligibility: We help businesses determine if they meet the criteria for VAT deregistration, ensuring compliance with FTA regulations.

2. Submit Accurate Applications: Our experts handle the entire application process, from preparing the necessary documentation to submitting the application on behalf of the business, minimizing the risk of errors and delays.

3. Manage Final VAT Returns: We assist in preparing and filing the final VAT return, ensuring that all outstanding liabilities are settled and the business is fully compliant before deregistration.

4. Avoid Penalties: With Tulpar Global Taxation's proactive approach, businesses can avoid costly penalties by ensuring timely and accurate submission of their VAT deregistration application.

5. Provide Ongoing Support: Even after deregistration, we offer continued support to ensure that businesses remain compliant with any residual VAT obligations or reporting requirements.

Conclusion

VAT deregistration is an important step for businesses that no longer meet the criteria for VAT registration or wish to simplify their tax obligations. While the process may seem complex, understanding the eligibility criteria and ensuring timely submission are critical to avoiding penalties.

Tulpar Global Taxation is here to guide businesses through the entire VAT deregistration process, providing expert advice and support to ensure compliance with UAE tax laws. Whether you’re closing down operations, falling below the VAT threshold, or simply seeking to streamline your tax obligations, our team of tax professionals is ready to assist.

By partnering with Tulpar Global Taxation, businesses can ensure a smooth and hassle-free VAT deregistration process, allowing them to focus on their core operations with peace of mind. Contact us today to learn more about our VAT deregistration services and how we can support your business in the UAE’s dynamic tax landscape.