Key Considerations for VAT Deregistration in the UAE

Considerations for VAT Deregistration in the UAE

Key Considerations for VAT Deregistration in the UAE

If your business’s annual taxable supplies total falls below AED 375,000, you can proceed with VAT deregistration in the UAE. While this move can offer several advantages, it’s important to be mindful of potential costs and the various considerations involved in the process.

For businesses in the UAE that cater to other companies unable to reclaim VAT on purchases or serve the general public, deregistering for VAT can confer a competitive edge. By eliminating the need to include VAT in your product prices, your business gains the ability to undercut competitors and maintain consistent pricing for enhanced profitability.

Before embarking on the journey of VAT deregistration in the UAE, whether on a permanent or temporary basis, your business’s annual turnover must remain below the specified limit. Before submitting your deregistration application, it is strongly recommended to consult with a tax professional within the UAE to gain expert insights and avoid potential pitfalls that could impact your business.

If you’re an accounting student in the UAE, you’ve probably heard about VAT (Value Added Tax). It’s that extra bit of money we pay when we buy things. But did you know that there’s something called “VAT Deregistration” that’s equally important? Don’t worry; we’re here to break it down for you in simple terms, even simpler than your favorite accounting formula!

What’s VAT Deregistration Anyway?

Alright, so you know how to register for VAT when your business hits a certain income level? Well, VAT Deregistration is the opposite. It’s when you need to cancel your VAT registration because your business is no longer making enough money to stay in the VAT club, just like how you’d cancel a subscription you’re not using anymore.

Why Would You Want to Deregister?

Think of it like this: you started a lemonade stand, and business was booming! You registered for VAT because your sales were over a certain limit. But time passed, and maybe people got tired of lemonade, or the summer just ended. Your sales are lower, and you’re thinking, “Do I need to keep doing all this VAT stuff?” That’s when you might consider VAT Deregistration.

The Magic Number: AED 187,500

In the UAE, a number is like the golden ticket to the VAT world: AED 187,500. If your sales in the past 12 months fall below this number, you can think about waving goodbye to VAT. But remember, you also need to check your future sales. If you expect them to stay low, you’re on the right track to deregister.

Timing Is Everything

Just like you need to time your baking so your cookies come out perfectly, timing is crucial in VAT Deregistration too. You can only apply for deregistration if you’re sure your sales will stay below AED 187,500 in the next 30 days. It’s like telling your teacher you won’t need that extra math class because you’re confident you’ve figured it out.

Say Goodbye to Tax Refunds

When you’re registered for VAT, you might get tax refunds for the VAT you’ve paid on your business purchases. But if you deregister, that party’s over. No more refunds for you, so make sure you’ve done the math and it’s worth it.

The Paperwork Shuffle

Deregistering isn’t just about saying, “I’m out!” There’s some paperwork involved too. You must complete a form and submit it to the tax authorities. Remember, just like you wouldn’t leave a class without officially telling your school, you can’t leave the VAT club without telling the tax folks.

VAT Liability for Asset Holding During Deregistration

If your business retains assets during deregistration, it may incur VAT liability that requires resolution. This liability pertains to assets disposed of at fair market value on deregistration. Strategies exist to mitigate or eliminate potential VAT liability, including the following:

  1. VAT payable by the business is calculated based on the market value of assets as of the VAT deregistration date, factoring in any depreciation, obsolescence, or damage incurred by the items.
  2. Assets for which input VAT was not claimed during the fiscal period of purchase are exempt from VAT liability. This exemption applies to secondhand vehicles acquired from non-VAT registered suppliers. Exceptions include standard-rated goods acquired VAT-free due to a business takeover as a going concern.
  3. Assets subject to VAT exemption or zero rates do not incur output VAT liability.
  4. Intangible assets, such as goodwill or patents, do not trigger output VAT liability.

Considering Post VAT Deregistration Expenses

During the final VAT return filing, businesses must account for VAT related to outstanding sales invoices and can reclaim input VAT for unpaid purchase invoices. Claims for business expenses, such as accounting fees, can still be made post-VAT deregistration as long as they pertain to a period during which the business was VAT registered in the UAE.

Transitioning to a New Tax Registration Number

In cases where a business changes its company structure, for example, transitioning from a sole proprietorship to a limited liability company in the UAE, the sole trader must initiate VAT deregistration. Regulating tax agents in Dubai, UAE, recommend that the new company register for VAT on the same day as deregistration occurs. While the new business can retain the old tax registration number, this choice entails assuming responsibility for potential VAT liabilities, including errors from previous years. Opting for a new tax registration number offers a clean slate and helps mitigate uncertain risks.

Compulsory Deregistration Scenarios

For VAT-registered businesses in the UAE that cease trading and have no intention of engaging in taxable sales moving forward, compulsory deregistration is required effective from the final trading day. However, there’s room for businesses to extend this date, including purchase invoices for input VAT reclamation purposes. Additionally, professional dues may arise upon your business’s final sale.

Expert Guidance

Although the pros and cons of VAT deregistration in the UAE might seem straightforward, seeking advice from tax experts within the UAE is highly recommended. Before making any decisions and moving forward, it’s prudent to exercise caution, as there could be potential costs involved in the process of VAT cancellation.

Additionally, it’s important to gather necessary records and maintain accounts of relevant receipts and invoices, as these will be essential for your business’s final VAT return filing. To ensure the smooth management of all subsequent VAT-related affairs, feel free to reach out to us at VAT Registration UAE today!

Final Thoughts

So there you have it, VAT Deregistration in the UAE in a nutshell. It’s like putting your business on a diet – if it’s not making as much dough, you can skip the VAT feast. Remember, the numbers matter, timing is key, and paperwork can’t be ignored. So, whether you’re sipping lemonade or crunching numbers, VAT Deregistration is a step that can save you time and effort when done right.

A Comprehensive Guide to VAT Deregistration UAE: Steps and Eligibility

guide to VAT Deregistration UAE

A Comprehensive Guide to VAT Deregistration UAE: Steps and Eligibility

When a business wants to stop participating in VAT in the UAE, its TRN (Tax Registration Number) gets canceled. This happens through a process called VAT deregistration. To do this, a business must tell the Federal Tax Authority (FTA) that they want to cancel their VAT registration. But there are rules – the government decides when you can leave and why. The FTA also determines if you can leave or not.

People leave the VAT system for different reasons, but these reasons have to match the government’s rules. The government sets the rules like guidelines for the VAT club. If your reason matches, you can ask to leave. There’s a specific time when you can leave without getting into trouble. It’s important to follow this time to avoid extra fees or problems.

Knowing the VAT laws is important. It’s like understanding the rules of a game before you play. To leave VAT correctly, you need to know the current VAT laws in the UAE. This helps you do everything right and on time. Leaving VAT is a bit like solving a puzzle. You need to tell the FTA, follow the rules, and know when to do it. So, whether you’re saying goodbye to VAT for a while or forever, you know how to do it correctly.

Today, we’re unraveling the intricacies of a critical aspect of the UAE’s tax landscape – VAT deregistration. While it might sound complex, we’re here to demystify the process and guide you through each step. Think of this as your roadmap to understanding how businesses can bid farewell to their VAT registration in the UAE.

Understanding VAT Deregistration UAE

To kick things off, let’s clarify what VAT deregistration UAE entails. In the UAE, the termination of a Tax Registration Number (TRN) is the outcome of VAT deregistration or cancellation. When businesses decide to step out of the VAT circle, they must formally cancel their registration with the Federal Tax Authority (FTA). However, this decision isn’t arbitrary; it must align with specific conditions outlined in the UAE’s VAT regulations. The FTA has the authority to accept or reject VAT deregistration applications.

The Importance of VAT Deregistration UAE

VAT deregistration in the UAE is as pivotal as the initial registration process. Any VAT-registered entity should be well-versed in the prevailing VAT legislation to ensure a smooth application for VAT cancellation. Furthermore, there’s a designated timeframe for a business to opt for deregistration without incurring penalties.

Eligibility for VAT Deregistration

Now, let’s delve into the eligibility criteria for VAT deregistration UAE, as per the current regulations set by the Federal Tax Authority:

1. Mandatory VAT Deregistration: A business can qualify for mandatory VAT deregistration if:

  • It ceases to engage in taxable supplies, or
  • The total value of taxable supplies for the past year and the upcoming thirty days doesn’t surpass the threshold for voluntary VAT registration.

   If your business meets these conditions, applying for VAT deregistration is essential to avoid fines and penalties promptly.

2. Time Limit for Mandatory Deregistration Application: Once your business becomes eligible for VAT deregistration, it must apply within twenty business days from the triggering event. Failure to adhere to this timeline can result in financial penalties.

Voluntary VAT Deregistration

Voluntary VAT deregistration UAE is also a possibility if your business falls under the following scenarios:

  • It has dealt with taxable supplies over the last twelve months, but its taxable supplies are below the mandatory VAT registration threshold (currently Dh375,000).
  • Twelve calendar months have passed since your business registered for voluntary VAT.

In these cases, you can apply for voluntary VAT deregistration without a specific deadline imposed by the Federal Tax Authority.

The VAT Deregistration Process

Once your business has valid reasons for VAT deregistration, it’s time to initiate the process by providing the necessary information to the tax authority. Alongside the application, clearances for outstanding taxes, fines, or administrative penalties must be included, along with proof of filed returns. Any outstanding penalties and liabilities must also be settled if your business fails to apply within the required timeframe.

VAT Deregistration Penalty

Remember that a penalty of Dh10,000 applies if a mandatory VAT deregistration application is not submitted within the stipulated deadline.

After Application Submission

You’ll receive a confirmation notification from the FTA after submitting your VAT deregistration UAE application and supporting documentation. Subsequently, the FTA will review the application’s reasons, highlighting the importance of providing proof and evidence. Factors such as pending penalties, return statuses, and tax payments will also undergo scrutiny.


Congratulations, you’ve been guided through the VAT deregistration UAE process! Understanding the eligibility criteria and adhering to the proper steps are crucial. If you ever find your business in a position where VAT deregistration makes sense, follow this comprehensive guide to navigate the process confidently. Here’s to smooth sailing on your journey through the UAE’s VAT landscape!