VAT Deregistration in the UAE
What is VAT deregistration
Deregistration enables VAT-registered businesses and individuals in the UAE to cancel their tax registration under certain conditions. Deregistration could be mandatory or voluntary.
Mandatory VAT deregistration
It is mandatory for VAT registered businesses and individuals to apply for VAT deregistration within 20 business days from the end of the month in which any of the following events occurs:
They cease making taxable supplies (stop selling for any reason such as license freezing or cancellation)
Are still making taxable supplies but the value of those supplies in the preceding 12 months is less than the Voluntary Registration Threshold (AED 187,500)
The FTA will approve the deregistration request if they are satisfied that the applicant no longer makes taxable supplies and does not intend to make any taxable supplies in the next 12 months.
Or the value of taxable supplies or taxable expenses over the previous 12 month period is less than the Voluntary Registration Threshold and the taxable person does not anticipate making taxable supplies or incur taxable expenses in excess of the Voluntary Registration Threshold in the next 30 days.
Failure to apply for a mandatory deregistration
A VAT registered business or individual will be subject to a late deregistration penalty of AED 10,000 if they fail to apply within the 20 days’ time frame.
Voluntary VAT deregistration
A VAT registered business or individual can apply for a voluntary VAT deregistration if the total value of their taxable supplies in the previous 12 months was less than the Mandatory Registration Threshold (AED 375,000) and greater than the Voluntary Registration Threshold (AED 187,500)
However, if the applicant has voluntarily registered for VAT, voluntary deregistration is only possible after 12 months from the date of registration.
How to apply for VAT deregistration?
VAT de-registration request can be made from the registrant FTA account.
On the dashboard under the VAT section in the “De-registration status” click De-Register to start the application.
How to test your threshold?
VAT-registrants must carry a historical test at the end of each month calculating the total taxable revenues in the last 12 months.
In addition, they must carry a future test as well by assessing the expected taxable revenues in the next 30 days.
What happens after the VAT deregistration?
Once you are deregistered from VAT, and your business is still operating but below the voluntary registration threshold, you will:
Stop charging VAT on all taxable supplies of goods or services that you make
Issue non-tax invoices to your customers
Not be entitled to recover the amount of VAT incurred on purchases (input tax)
Continue testing your threshold at end of each month, and as soon as you reach a gross revenue of AED 375,000, you must apply for mandatory VAT registration within 30 days.