One of the overlooked aspects of the UAE VAT system is VAT Deregistration. The requirements for deregistering your Tax Registration Number under the VAT Legislation are quite specific and require diligent interpretation and timely management.
Deregistration is as important as VAT registration and taxpayers must have a clear understanding of the circumstances or face penalty for late application for VAT Deregistration. In summary, taxpayers must apply for deregistration within 20 business days when becoming eligible for VAT Deregistration. Failure to apply to deregister attracts a fixed penalty of AED 10,000.
What is VAT Deregistration?
Deregistration from the VAT system is mandatory when:
The taxpayer knows of a material change in their business that affects ongoing operations (such as voluntary liquidation) and does not expect to make any further taxable supplies
or taxable supplies will fall below the voluntary threshold of AED187,500 (calculated from the preceding 11 months and next 30 days) and does not expect to cross this threshold in the next 30 days
An application for VAT Deregistration must be submitted to the FTA and the TRN will be canceled following the successful submission of the required documents and clearance of all tax liabilities. The procedures and requirements can be onerous. It is vital to prepare to minimize issues and delays that could lead to penalties and ideally support should be sought to ensure complications and subsequent penalties can be avoided.
Eligibility for VAT Deregistration
Under the Executive Regulations and Tax Procedures Law, VAT Deregistration is eligible under two scenarios: Voluntary and Mandatory.
Taxpayers can apply for voluntary deregistration when taxable supplies fall below the mandatory threshold of AED 375,000 but above AED 187,500. However, the obligation becomes a mandatory requirement if taxable supplies expect to fall below the voluntary threshold in the next 30 working days.
How to Deregister for VAT in the UAE?
The procedures are online through the taxpayer FTA portal. In the submission of any application, a thorough basis for deregistration will be necessary with all accompanying documentation to support the application. Subsequently, the FTA will review and verify the rationale and supporting evidence. Only valid applications are approved especially in the case of voluntary applications. Several areas will be reviewed and satisfactorily concluded during the application process including:
1. Status and completion of VAT returns
2. Clearance of outstanding tax liabilities
3. Clearance of any pending administrative penalties
Thereafter a pre-approval can be secured under a valid reason. The final approval will be on hold until the outstanding liabilities and payments are settled.
Deregistration for Tax Groups
Tax Groups incur the same requirements and criteria separately and individually for each registered entity in the Group.
However, specific criteria also apply to the Tax Group itself if applying for deregistration.
1. The Group deregistration will be approved if the Group no longer meets the criteria to be considered as a Tax Group.
2. The Group could be granted deregistration if the constituent member companies are no longer associated with the Group through control
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