UAE VAT Deregistration Penalty: How to Cancel VAT Registration

UAE VAT Deregistration Penalty: Deregistration of VAT in the UAE means business in UAE cancels its VAT registration with the Federal Tax Authority (FTA). It means de-activation of the registration and the VAT number of the taxable person. Tax de-registration can be applied for by a person registered under VAT or done by the FTA on finding that a person meets the conditions for de-registration. The Taxable firms need to know all the procedures of the VAT deregistration as the failure to apply will attract administrative penalties.

VAT Deregistration Eligibility

A person registered under VAT can apply for Tax De-registration in the following 2 cases:

• The person stops making taxable supplies and does not expect to make any taxable supplies over the next 12-month period OR
• The person’s taxable supplies or taxable expenses incurred over a period of 12 consecutive months is less than the voluntary registration threshold (AED 187,500) and he/she does not anticipate to cross this threshold in the next 30 days.

Note that a person who has voluntarily registered under VAT cannot apply for de-registration in the 12 months following the date of registration. And the time limit for Compulsory VAT Deregistration process is 20 business days from the event causing such eligibility. The late application attracts a penalty that leads to financial loss.

How to cancel VAT registration in UAE

The companies opting for VAT deregistration are required to submit the application to the FTA. The necessary details and the reason for the deregistration should also be submitted. The FTA will verify the reason and if it is found to be valid then the authority will approve the voluntary deregistration. The FTA will also verify the following:

1. Status of Returns
2. Outstanding tax payments
3. Any penalties that are pending

A pre-approval for VAT deregistration can be secured if the reason is valid. However, the final approval will be on hold until the outstanding payments are cleared.

A registered entity should follow the below-mentioned procedures to cancel VAT registration in UAE:-

• Fulfill the criteria for the cancellation
• Log into their VAT Account on FTA Portal
• Fill in the vat deregistration form UAE online with the details along with the reason for the cancellation
• Submit the form electronically
• Receive SMS confirmation on the registered number for submission.

Subsequent to the submission of Application, the FTA will:-

• Analyze the application for the reasons provided
• Analyze the status of returns
• Analyze if any pending penalties or tax payments are there
• Approve the application if everything is according to the rules and regulations
• Deregister the VAT Registration

The Federal Tax Authority will deregister the VAT registration with effect from the end date of the last tax period when the taxed body became eligible for the annulment of VAT.

Formalities to be cleared for the approval decision from the FTA

The approval decision by the FTA for deregistration of VAT depends on:-

• The reasons provided
• The clearance of all outstanding Taxes against the entity
• The clearance of returns being filed
• The clearance of any Administrative Penalties to be paid in full.
• The approval from FTA will show the status of the application as “Pre-Approved” even if the reasons are valid. It will only be considered complete when all these liabilities are furnished.

UAE VAT Deregistration Penalty

The penalty for failing to apply for a mandatory de-registration of VAT within the specified timeframe i.e. within 20 business days, from the occurrence of the event causing the tax payer entity to get eligible for tax deregistration, is AED. 10,000.