In today’s Dubai business environment, companies may encounter situations where they need to stop their VAT registration. VAT deregistration in Dubai is regulated by the Federal Tax Authority (FTA) and is necessary for companies that no longer qualify for VAT registration due to their activities or have gone out of business.
What is VAT Deregistration in Dubai?
VAT Deregistration in Dubai is the cancellation or removal a company’s VAT registration with the FTA. With cancellation of registration, the company is not required to charge VAT on taxable supplies or issue VAT returns. VAT Deregistration in Dubai is important for businesses that have stopped trading and for those who are below the VAT registration threshold or no longer conduct taxable activities.
When Is VAT Deregistration Needed?
Businesses located in Dubai have to request for VAT deregistration under the circumstances listed below:
Termination of Business Operations: If a company has stopped making taxable supplies for more than one year and does not expect to make any in the upcoming 12 months, that company is required to deregister for VAT.
Revenue Falls Below the Voluntary Registration Threshold: A business may apply for voluntary VAT deregistration if its taxable supplies in the preceding 12 months are below AED 187,500 and does not expect to surpass this amount within the following 30 days.
Revenue Falls Below the Mandatory Registration Threshold: A business can apply for VAT deregistration if its taxable supplies are less than AED 375,000 in the last 12 months and 12 months have elapsed since the date of voluntary registration.
It is critical to understand that businesses that voluntarily registered for VAT are ineligible to deregister within the first 12 months following their registration.
Time Frame for VAT Deregistration
A business that is registered for VAT must submit an application for deregistration within 20 business days from the VAT deregistration-triggering event. Missing this timeframe may incur penalties.
Required Documentation for VAT Deregistration
In order to complete the VAT deregistration process, the following documents are required:
Trade License: Cancellation or liquidation documents from the relevant authorities regarding the trade license.
Financial Statements: Recent financial statements, including balance sheets and profit and loss statements or trial balances whether audited or unaudited.
- Ministry of Labour Letter: A letter confirming employee headcount.
- Sales Agreements: Original and updated sales contracts or licenses.
- Company Setup Agreement: Updated company setup contracts.
- Financial Turnover Template: Summary of taxable income and expenses from the date of registration.
- Evidence of Business Cessation: Documents evidencing the break in business operations, if any.
- Supplier and Importer Details: Business’s suppliers and importers’ data.
- Business Itinerary: A schematic representation of supply and import business itinieraries including supplier and customer countries.
- Invoice Samples: Issued invoices by the business.
- Multiple TRNs: If relevant, multiple Tax Registration Numbers.
These documents are critical for supporting the application for deregistration while meeting FTA compliance requirements.
VAT Deregistration Process
Dubai’s VAT deregistration process is completed through the FTA EmaraTax platform. The steps include:
EmaraTax access: Log in to your EmaraTax account.
Select Taxable Person: Pick the taxable person for whom you wish to apply for deregistration.
Initiate Deregistration: Click “Actions” then “De-Register” to commence the VAT deregistration application.
Complete Application: Provide the necessary information, upload required documents, and explain the reasons for deregistration.
Submit Application: Crosscheck the application, make any necessary changes, and submit it to the FTA.
Await Approval: The FTA will assess the application and cancel VAT registration upon approval.
Completing the application is estimated to take 45 minutes, while the FTA intends to process the application within 20 business days from receiving the finalized application.
Penalties for Late VAT Deregistration
Not adhering to the specified window for applying for VAT deregistration may incur penalties. The penalties are as follows:
- Late Submission: AED 1,000 for the first month of delay.
- Subsequent Months: An additional AED 1,000 for each month after, with a ceiling of AED 10,000.
- Businesses must adhere to the 20-business-day grace period to avoid incurring these penalties.
- Final VAT Return and Liabilities
- Business responsibilities prior to deregistration approval include:
- File Final VAT Return: Submit final VAT returns to the FTA.
- Settle Outstanding Liabilities: Pay any pending VAT obligations or apply for a refund if eligible.
It is important to understand that any products or services that are part of the business activities may be considered as deemed supply and must be included in the final VAT return submission.
Ensuring Timely VAT Deregistration
Timely VAT deregistration is critical for businesses to:
Avoid Penalties: Pay no fees for late deregistration.
Ensure Compliance: Stay within the legal framework of the UAE’s tax laws.
Accurate Reporting: Report all taxable supplies and liabilities accurately.
It is essential for all businesses to review their tax positions on VAT regularly and consult specialists when considering deregistration.
Final Remarks
The VAT deregistration process in Dubai is essential for businesses that stop trading or no longer qualify for the VAT registration requirements. Capturing the right eligibility requirements and documentation, along with understanding penalties, assists businesses in complying with the FTA’s regulations. Following the correct processes and timelines helps in conducting VAT deregistration smoothly and without incurring penalties.
More information and assistance regarding VAT deregistration can be found on the FTA website: https://tax.gov.ae/en/
