VAT Deregistration Penalty in UAE
‘Procrastination Leads to Disarray’
Deregistration of VAT in the UAE means business in UAE cancels its VAT registration with the Federal Tax Authority (FTA). VAT deregistration in UAE is as important as registration for a VAT. There could be various reasons for canceling the registration for VAT in UAE. But such reasons should comply with the conditions defined by the Law related to VAT. If the reasons are not valid and the conditions are not fulfilled, the FTA might reject the application for deregistration.
Taxable businessmen must know the rules and processes for VAT annulment in UAE, as administrative penalties will be imposed on failure to file an application within the timeframe specified in the tax law. Let us understand the circumstances in which an entity can de-register under VAT and the process to be followed for the same.
What is VAT De-registration?
VAT De-registration is the practice of the annulment of the VAT-registration by a taxable person. Once the application is received, the FTA rescinds the VAT-registration.
Eligibility for VAT Deregistration
As per the regulations of FTA, an entity can apply either for Compulsory (mandatory) deregistration or for Non-compulsory (voluntary) deregistration. Whether it is a compulsory or non-compulsory category, the applicant should comply with certain eligibility norms to get the cancellation process approved by the FTA.
An individual or a business is eligible under Compulsory deregistration:-
- If it stops dealing in taxable goods and services any more
- If the taxable supplies or expenses in the past 12 months and the next 30 days do not exceed the voluntary registration threshold of AED.187,500
The time limit:
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.
It is to be remembered that a person who has willingly registered under VAT cannot apply for deregistration in the next 12 months following the date of registration.
Non-compulsory VAT Deregistration
An individual or a business is eligible under Non-compulsory deregistration:-
- If the supplies or expenses for the past 12 months are below the Compulsory VAT registration threshold of AED.375, 000
- If the entity has passed 12 calendar months since the registration with the FTA under Non-compulsory registration.
There is no time limit for an entity to deregister under non-compulsory segment.
How to Cancel VAT Registration in UAE?
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.
VAT Deregistration Penalty in UAE
If an entity fails to apply for a compulsory de-registration of VAT within the specified timeframe i.e. 20 business days, the penalty amounts to AED. 10,000.
VAT Deregistration for Groups
A group should follow the same procedure as that of the individual for Deregistration of VAT in UAE. Besides the other requirements, the group should comply with certain decisive factors to get the approval from the FTA. The registered group can move forward with its de-registration process:
- If it no longer meets the prerequisites to be considered as a group.
- If the businesses in the cluster are no more financially associated with the group.
- If it anticipates that the tax status as a cluster can result in any kind of tax dodging.
CDA’s function in VAT related issues in UAE
The mainstream of companies in UAE eligible for registration under VAT has already completed the registration process. A registered taxable person is required to comply with the required rules and procedures under VAT. Invoices must be issued in the specified format, returns have to be filed on a timely basis and the tax due is to be paid by the due date.
CDA provides the professional services for VAT Registration and Deregistration in compliance with the VAT laws in Dubai, UAE. Our featured VAT consultation services provide a hassle-free atmosphere against any administrative penalties related to VAT and save your money and time. We provide our services in Tax Consultation, Debt Advisory, Accounting & Bookkeeping, Business Advisory, Tax-Free Consultation, etc.
Do contact us if you face any issues regarding VAT registration or deregistration. The CDA experts will assist you.