When and How to Terminate Your VAT Journey

By Kaushalya Peiris   04 September, 2023

VAT deregistration, though not the most glamorous topic, is a critical aspect of financial management for businesses. It's the process of saying goodbye to the world of Value Added Tax when your circumstances change. But understanding when, why, and how to embark on this journey can be bewildering.

In this blog, we're here to simplify the complex. We'll walk you through the triggers for VAT deregistration, the essential steps involved, and the potential impact on your business. Whether you're contemplating this move or simply want to grasp the basics, we will demystify VAT deregistration and empower you with the knowledge you need to make informed decisions.

 

What is VAT Deregistration?

VAT Deregistration is the formal procedure that allows a registered taxable person to terminate their VAT registration. This process entails deactivating the persons registration and VAT identification number. VAT Deregistration can be initiated either by a person who is registered for VAT or by the Federal Tax Authority (FTA) when criterias for deregistration are met. 

 

When to Consider VAT Deregistration

1. Falling below the Voluntary Registration Threshold: If the total value of taxable supplies or taxable expenses incurred over a continuous 12-month period falls below the voluntary registration threshold of AED 187,500, and there is no anticipation of exceeding this threshold in the next 30 days, it's advisable to evaluate whether VAT de-registration is appropriate.

2. Cessation of Taxable Supplies: If a taxable person discontinues making taxable supplies, whether due to business closure, cessation of operations in the UAE, or a change in business activities (such as shifting from taxable to exempt supplies), VAT deregistration becomes a viable option. This applies if there is no expectation of making any taxable supplies in the subsequent 12-month period. 

Additionally, the Authority may, in accordance with the controls and conditions specified in the Executive Regulation of this Decree-Law, issue a Tax deregistration decision, if the Authority finds that continuity of such Tax Registration may prejudice the integrity of the Tax system.

 

How to Deregister for VAT

A registrant should initiate the de-registration process within 20 business days of the occurrence of either of the above two events. The process involves submitting a de-registration application through the FTA's online portal, accompanied by all necessary documentation to substantiate the request.

Failure to submit the de-registration application within the specified timeframe may result in penalties. Specifically, a delay incurs a penalty of AED 1,000, with additional monthly penalties imposed thereafter, up to a maximum of AED 10,000.

 

VAT Deregistration is a process that must be completed accurately and in compliance with the FTA's requirements. Any errors or omissions can lead to penalties or future tax liabilities, so it is advisable to seek professional advice from a tax expert if you are unsure about any aspect of VAT deregistration. 

 

Are you looking to deregister your business? Need advice? Contact us to see how we can help you or check out our VAT services