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VAT deregistration: This is the official suspension of a business’s VAT registration with the FTA. Once the deregistration takes place, the company may no longer:
→Issue VAT invoices
→File VAT returns
→Claim input VAT on purchases
→Retention under VAT Law VAT-specific peeking.
Deregistration of a business also occurs when the company ceases to make taxable transactions or when it no longer meets the minimum financial qualifications for VAT registration.
→Many business organizations suffer penalties due to errors in the deregistration of VAT. Some of the errors include the following:
1.Unpaid Tax Liabilities: The businesses would have to settle all the outstanding VAT before deregistration.
2.Failure to cancel trade licences and permits: All the licenses issued by the government are supposed to be cancelled by the businesses.
3.Lack of Labor Law Compliance: Do not forget to pay labour costs between the employees to the employees and the benefits and visa cancellations before deregistration.
4.Unfinished Crossing of Bank Accounts: Strip the company bank accounts and cash in the unpaid debts.
→The process of deregistration of VAT in the UAE can be a thorny one, and it can be subject to the FTA rules.
→Evaluation of the eligibility for VAT deregistration.
→Researching and filling out all the necessary forms.
→VAT returns and payment of penalties.
→Linking with the FTA to go through with an effective processing.
One should be familiar with the different types of VAT deregistration in the UAE, where business firms are interested in complying with the taxation requirements and making an easy exit from the VAT scheme.
1.Involuntary VAT Deregistration:
According to FTA, organizations are expected to be in agreement with some conditions of the de-registration of VAT in the UAE. In case a company registered in Dubai discontinues selling any taxable goods and services, the company will have to apply to get VAT deregistration.
Moreover, a taxable person must deregister in cases where the annual turnover or purchases that were taxable by the person in the past 12 months have exceeded the AED 187,500 limit. The result of not filing an application for VAT de-registration UAE within 20 business days presupposes fines of AED 10,000 or more.
2.UAE VAT Deregistration voluntarily:
In two instances, the deregistration of VAT can be voluntary made to businesses in Dubai:
Within the range of their annual turnover of less than AED 375,000 and above AED 187,500.
They can cancel the registration of VAT in the UAE in case they want to cancel it, even when they are still operational.
Voluntary VAT de-registration UAE has no time restriction, which is why business organizations can file it at their own discretion, considering all the conditions of compliance.
There is a step-by-step process for VAT deregistration in the UAE, which is as follows:
1.Access EmaraTax Portal:
Log in to EmiraTax using your credentials or UAE PASS.
2.Select Company:
Choose the taxable entity (company) relating to your profile.
3.Start Deregistration:
On clicking the VAT tile, in the actions button, you have the option of deregister, and the application starts.
4.Review and Update:
Make corrections or verify bank account (where required).
Make sure you are in possession of all the documents required to deregister.
5.Fill Application:
E-file the deregistration form and specify the reason for deregistration.
Provide supporting documents, e.g., trade licence cancellation, financial statements, evidence of cessation, etc.
Enter the date of eligibility and effective date to deregister (reason why may be changed in case of change).
6.Forwards Product and Expense Information:
Report information on taxable products and expenses in Dubai (UAE).
7.Check Authorized Signatory:
Before proceeding, check the signatory.
8.Review and Declaration:
Talk about all the provided information.
9.Submit your application.
To deregister in Dubai, the businesses must submit:
Copy of repudiated trade license.
→As of the liquidation or resolution of the board.
→Audited (or unaudited) financial statement (P&L, balance sheet, trial balance).
→A letter by the Ministry of Labour about the number of employees.
→New license or new sales contracts.
→The data about the suppliers and importers.
→Official declaration of business closure (where needed).
→Evidence of any payment of unpaid tax that is not paid.
→The deregulation of VAT in the UAE is done in the following steps:
→Step 1: Emara Tax Portal Log-in:
Enter information on the EmaraTax portal with credentials.
In case you are a first-time user, create an account or click Forgot Password button to access your account.
→Step 2: File VAT Deregistration Operating:
Go to the VAT section and select an option of deregister option.
Reflect the refresh bank information and proceed in case of necessity.
→Step 3: Justification and Documenting Materials:
Select the reason for deregistration.
Record date and supporting data.
Give information on financial turnover, taxable income and expenses.
→Step 4: Submission and Review of the Application:
Investigate everything before implementation.
The FTA will review your application, verify your tax status on your tax returns, and verify the fact that you have no liabilities or not.
→Step 5: Approval of Confirmation and Deregistration:
The cancellation of the VAT number is to be done once it is approved.
FTA will notify the applicant in case the need for some additional documents exists.
→Deregistration of VAT in the UAE has the following effects:
1.No VAT Charges:
The businesses will not be able to charge tax on sales after the deregulation, and this can lower the prices for the tax-free people. However, business purchases are no longer eligible to claim VAT.
2.Minor Hurdle to Administration:
The deregistration of VAT eliminates the necessity to file VAT returns, which is less expensive to do, and time is also saved on the administration of taxes.
3.Reforms in Financial Planning:
The deregistration of VAT can affect the cash flow and pricing competitiveness; this is why enterprises need to reconsider their financial policy.
→Key benefits include:
1.Requirements to escape penalties: Due and proper deregistration will help in staying out of fines of AED 1,000 every month to AED 10,000 in case of delay or disobedience.
2.Saving time and resources: Experts handle complex documents and technical VAT regulations, and thus, the companies are able to devote their time and focus on the business.
3.Reduction of risks of mistakes: Professionals avoid errors that occur frequently in the preparation of records and eligibility forms that can lead to audit or rejection.
Closure, they ensure that final VAT returns are made in the proper way and make sure that the debts are paid and refunds are made in the case of a credit existing.
4.Financial management: The company can improve its financial management by removing the unwarranted VAT compliance liability, which will enhance the cash flow and help save on the cost of administration.
Here are some common questions about VAT Deregistration
The last tax return is the last tax return that you submit prior to deregistering VAT with the FTA. The last day of taxation is the date of your Deregistration of VAT. Within 28 days of Deregistration, you have to file your final tax returns and pay any payable taxes. Not doing it in time will mean punishment and your de-registration procedure may be postponed.
You (VAT Registrant) or tax agents in UAE or a legal representative can apply to FTA with VAT Deregistration application.
A 1,000 AED penalty and a monthly penalty, up to a maximum of 10,000 AED, respectively, is imposed on failure to file a deregistration application by the due date as indicated in the Tax Law.
To log in with the Emaratax platform you can use your FTA account or UAE ID pass and deregister with VAT according to the steps provided here.
→The de-registration will be required when:
The business ceases to make taxable supplies.
This is a decrease in taxable turnover to less than AED 187,500 during the previous 12 months.
Voluntary deregistration can be made in case the turnover is taxable and is less than AED 375,000 (mandatory) but greater than AED 187,500.
The application should be done within 20 business days of eligibility to prevent penalties.
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