Value Added Tax (VAT) is an important part of doing business in the United Arab Emirates (UAE). But what happens when your business stops making taxable supplies is less than AED 187,500, cease operations or changes the legal type? That’s where VAT deregistration comes in. In this guide, we explain what VAT deregistration means, why it is important, who can deregister, and when you should apply, in clear and simple language.
1. What Is VAT Deregistration?
VAT deregistration is the official process of cancelling your business’s VAT TRN with the Federal Tax Authority (FTA):
• Your Tax Registration Number (TRN) becomes inactive.
• You must stop charging VAT on your sales invoices
• You cannot claim back VAT on expenses.
It is important to note that VAT deregistration is separate from cancelling your trade licence. Both processes must be completed individually.
2. Why Is VAT Deregistration Important?
VAT deregistration helps businesses avoid unnecessary compliance and penalties. Key reasons include:
• Avoiding penalties for late deregistration (which can reach AED 10,000).
• Stopping ongoing VAT return filing obligations.
• Ensuring a clean and compliant exit from the VAT system.
Until your deregistration is approved, you are still legally required to submit VAT returns and settle any pending liabilities.
3. Who Can Deregister From VAT?
There are two types of VAT deregistration: mandatory and voluntary.
a) Mandatory Deregistration
You must apply if:
• Your business has changed its legal type.
• Your trade license has been cancelled.
In these cases, deregistration is compulsory under UAE VAT law.
b) Voluntary Deregistration
You may apply voluntarily if:
• Your taxable turnover falls below AED 187,500 over the past 12 months.
- The taxable turnover is more than AED 187,500 but less than AED 375,000.
Voluntary deregistration can reduce administrative workload if VAT registration is no longer required.
4. When Should You Apply for VAT Deregistration?
If mandatory deregistration applies, you must submit your application within 20 business days from the date you become eligible (for example, when business operations has been ceased).
Before applying, ensure that:
• All pending VAT returns are filed.
• All outstanding VAT liabilities and penalties are settled.
• A final VAT return is submitted covering up to the deregistration date.
5. What Happens After You Apply?
Once submitted the VAT deregistration application is submitted:
• You will receive a notification from the FTA side confirming the application has been submitted.
• In some cases the FTA may request additional information with regards to the application, which must be submitted.
• Once the application review is done the FTA will then give a pre-approval and the taxable person must submit the final VAT return in the portal.
Once the final return has been submitted the FTA will then review and give the final approval.
Final Takeaway
VAT deregistration is a crucial compliance step for businesses that stop trading or fall below the VAT threshold. Submitting your application on time ensures you avoid penalties and unnecessary filing obligations. If you are unsure about your eligibility or documentation requirements, seeking professional guidance can help ensure a smooth process.
Need Help with VAT Deregistration?
VAT deregistration requires proper documentation, timely submission, and compliance with Federal Tax Authority (FTA) regulations. Digits can assist with the entire process, from assessing your eligibility to submitting the deregistration application, ensuring a smooth and compliant exit from the VAT system.