All businesses in the UAE have to register under VAT if they meet the criteria. They are required to comply with the FTA rules and processes under VAT. It means invoices have to be issued and documented in a specific format, and returns need to be filed on a timely basis to avoid administrative penalties.
FTA also provides a VAT registered person with an option to de-register or cancel his VAT registration. VAT cancellation results in TRN termination in the UAE, and in order to do so, the person needs to apply for the cancellation of the registration with the FTA. It is a crucial process, just like VAT registration, and the person needs to be aware of all VAT legislations and rules.
Here is everything you need to know about VAT de-registration or cancellation in the UAE.
What is VAT De-registration?
Termination of VAT registration is called VAT De-registration. In UAE, VAT de-registration is when a business applies for canceling its VAT registration with the Federal Tax Authority (FTA). If a person or a business meets the de-registration criteria, they can file for VAT cancellation.
How to cancel VAT registration in the UAE?
As soon as you have a justified reason for VAT de-registration in the UAE, you need to contact the authorities and inform them of your tax status. Businesses who want to cancel their VAT registration need to send an application to the FTA with the following documents:
- Any outstanding tax against your VAT-registered company.
- Any outstanding dues (or the ones paid in full) or administrative penalties against your business.
- Any VAT return is filed by the business.
Missing the application deadline will result in hefty penalties, so make sure to fire the best VAT consultancy in Dubai to be able to clear all the liabilities and apply away as soon as possible.
Who can apply for VAT de-registration?
As per rules set by the FTA, a registered business in the UAE has to mandatory VAT de-register in the following cases:
- The business stops dealing with taxable supplies and will not make such supplies over the next 12 months.
- The taxable supplies and expenses in the previous year don’t exceed the VAT registration threshold in the UAE.
As per VAT rules set by the FTA, a registered person or business in the UAE can voluntary de-register in the following cases:
- The business is dealing with taxable supplies, but for the past 12-months, they have failed to reach the VAT registration threshold (currently at AED 375,000)
- The business can voluntarily de-register if 12 months have already passed since it registered for VAT in UAE.
Important Note: if a business has voluntarily registered for VAT, it cannot de-register or cancel VAT registration within the 12 months following the registration date. To know more about this law in accordance with your company, contact VAT consultants in Dubai.
Time Limit for Mandatory and Voluntary VAT De-registration
Here is everything you need to know about the VAT de-registration application time frame and deadlines as set by the FTA.
For Mandatory De-registration
For mandatory de-registration, the business must file an application with the FTA within the first 20 days from the eligibility date. Failure to register within this time frame will lead to a penalty for the late application.
For Voluntary De-registration
For voluntary de-registration, there is no specific time frame or a deadline. Businesses can apply for voluntary VAT cancellation whenever they want to.
After submission of the de-registration application with necessary documents and details, the Federal Tax Authority (FTA) confirms the submission through a notification email. After the successful submission of documents, the FTA scrutinizes the reasons behind the cancellation of VAT registration. Therefore, it is essential to supply tangible proof and evidence that makes your business eligible for cancellation of VAT,
After the VAT cancellation application is approved by the authorities, the registrant will be sent a notification within ten business days after the application is approved.
VAT De-registration Penalty
If a business fails to submit the application form of mandatory VAT de-registration within the timeframe specified by the FTA, they will be charged a penalty of AED 10,000. The specified time frame is 20 business days after being eligible for Mandatory de-registration.
Get VAT Consultancy for Cancellation!
VAT cancellation or de-registration is as important as VAT registration. Therefore, consider contacting VAT consultants to know the rules of VAT cancellation in the UAE. It is essential for businesses in the UAE because in case you miss a deadline for filing the application, you will face administrative penalties ranging thousands of Dirhams, as imposed by the FTA.
With the guidance of these VAT agents in the UAE, you will have all the necessary information regarding the complete cancellation process, hence, avoiding penalties.