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As a financially strict nation, the United Arab Emirates (UAE) mandates that every business and individual conducting business operations within its borders must register and regularly pay their taxes. This requirement is designed to bolster the nation’s financial strength. However, in cases where business entities struggle to meet these tax obligations, the Federal Tax Authority (FTA) offers the option of VAT deregistration.
This process aims to reduce administrative burdens and simplify financial processes for these businesses. It’s important to note that not all businesses qualify for VAT deregistration in UAE. In this blog post, we will provide comprehensive information about the VAT deregistration process in the UAE and offer expert advice on how to navigate it successfully.
What is VAT Deregistration in UAE?
VAT deregistration in the UAE is the formal process by which a business or individual cancels their VAT registration with the Federal Tax Authority (FTA). This process is necessary when the entity no longer needs to be VAT registered, usually because it has ceased taxable activities or its revenue has fallen below the required threshold.
Deregistration reduces the administrative and financial burdens of VAT compliance for businesses that no longer meet the criteria in the UAE. The process involves submitting an application through the FTA’s online portal and providing the necessary documentation and justification for deregistration.
Why is VAT Deregistration Important For Businesses in the UAE
VAT deregistration is a critical consideration for businesses in the UAE with several important benefits. Here are five key reasons why it is important:
Cost Savings: Deregistering from VAT reduces the administrative and financial burdens associated with VAT compliance, such as filing returns and maintaining detailed records, thereby saving costs.
Streamlined Operations: Without the need to manage VAT registration obligations, businesses can focus more on their core activities, enhancing operational efficiency.
Regulatory Compliance: By ensuring that a business is registered for VAT only when necessary, deregistration helps maintain compliance with UAE tax laws and avoids potential fines or penalties.
Simplified Accounting: VAT deregistration can simplify accounting processes, particularly for smaller businesses or those with reduced taxable activities, making financial management easier.
Cash Flow Management: Without the need to collect and remit VAT, businesses can improve their cash flow, giving room for better allocation of resources and financial planning.
Overall, VAT deregistration allows businesses to operate more efficiently and cost-effectively when they no longer meet the requirements for VAT registration.
VAT Deregistration Conditions in UAE
VAT deregistration is a structured process that ensures businesses and tax groups are compliant with UAE tax laws while optimizing their financial and administrative efficiency. Here’s an overview of the key conditions of VAT deregistration in the UAE:
Voluntary Deregistration
Voluntary VAT deregistration in the UAE applies to businesses that registered for VAT voluntarily and later decide they no longer need to be registered. The conditions include:
Turnover Below the Voluntary Threshold: If a business’s taxable turnover falls below the voluntary registration threshold of AED 187,500, it can apply for deregistration.
Twelve-Month Criteria: The business must demonstrate that its turnover has remained below the voluntary threshold for the past 12 months.
Ceasing Taxable Supplies: If the business ceases to make taxable supplies and does not anticipate making any in the future, it can opt for voluntary deregistration.
Mandatory Deregistration
Mandatory VAT deregistration is required for businesses that no longer meet the criteria for mandatory VAT registration. The conditions include:
Ceasing Taxable Activities: If a business stops making taxable supplies and does not plan to resume such activities within the next 12 months, it must apply for deregistration.
Turnover Below Mandatory Threshold: If a business’s taxable turnover falls below the mandatory registration threshold of AED 375,000 per annum for a continuous period of 12 months, it is required to deregister.
Compliance with FTA Rules: The business must ensure all due taxes are paid and compliance requirements are met before deregistration.
VAT Deregistration for Groups
VAT deregistration for tax groups involves additional considerations due to the collective nature of the registration. The conditions include:
Group Disbandment: If the group disbands or no longer meets the criteria for group registration, it must apply for deregistration.
Member Leaving the Group: If a member leaves the group and the remaining members no longer meet the criteria for group registration, deregistration is required.
Change in Business Structure: Significant changes in the business structure of the group that affect its eligibility for VAT registration necessitate deregistration.
Compliance and Settlements: The group must ensure all outstanding tax liabilities and compliance obligations are settled before deregistration.
VAT Deregistration Application in UAE
The VAT deregistration application process in the UAE is straightforward but requires careful adherence to Federal Tax Authority (FTA) guidelines. Before continuing this process, it is crucial that you meticulously calculate your annual taxable turnover to ensure it’s accurate and not miscalculated. Importantly, you also have to ensure you have no outstanding tax and administrative penalties in your account. Here’s an overview of how businesses can apply for VAT deregistration:
Step 1: Prepare your documents
Before starting the application process, determine your eligibility based on voluntary or mandatory criteria for deregistration (e.g., turnover thresholds, and cessation of taxable activities). Once you ascertain your eligibility for VAT deregistration, gather all the necessary documents, including FTA tax registration details, financial statements, and reasons for deregistration.
Step 2: Visit the online submission portal
Next, access the EmaraTax portal and navigate to the VAT section. Then log in using valid credentials (e.g., TRN and password) associated with the registered VAT account.
Step 3: Submit the VAT Deregistration form
Once you’ve entered all your valid credentials, proceed to fill out the VAT deregistration application form online. Ensure that all information provided regarding the reason for deregistration and supporting documentation is accurate and complete.
Step 4: Await FTA's Approval
After you submit the application, the FTA carefully reviews both the application and all supporting documents. If everything meets the requirements and the documentation is deemed satisfactory, the FTA will approve your deregistration request.
Step 5: Receive notification
Upon reviewing your application, the FTA will notify you of the deregistration approval either via email or through the online portal. It’s important to note that the effective date of deregistration is usually the end of the tax period in which your application was approved.
Step 6: Fulfil all post-deregistration obligations
After receiving confirmation of your approval, you must fulfill any remaining tax obligations, which include filing the final tax return and settling any outstanding payments. Additionally, it is essential to maintain records under UAE Federal Tax Authority (FTA) tax regulations for the specified retention period
Time Frame for UAE VAT De-registration
As a taxable person in the UAE, it is crucial to apply for VAT deregistration within 20 business days from the cessation of activities related to VAT supplies. This timeline ensures compliance with Federal Tax Authority (FTA) regulations and facilitates the timely processing of your deregistration request. Prompt action helps avoid potential penalties and ensures a smooth transition out of VAT obligations for your business.
How Can Tulpar Global Taxation Help You in the Deregistration Process?
Tulpar Global Taxation specializes in providing seamless VAT deregistration services in the UAE. With their expert guidance, they navigate businesses through the complexities of eligibility criteria and procedural requirements for VAT deregistration. They meticulously manage all documentation, ensuring completeness and accuracy before submission.
Handling the entire application process, including online form completion and submission to the Federal Tax Authority (FTA), Tulpar Global Taxation acts as a reliable liaison. They maintain clear communication with the FTA, addressing any queries and ensuring a smooth review process. Their commitment to compliance with UAE tax laws and regulations minimizes risks and ensures that businesses fulfill all necessary obligations during and after the deregistration process.
Tulpar Global Taxation’s efficient and supportive approach aims to streamline VAT deregistration, allowing businesses to transition out of VAT obligations smoothly and confidently.
