VAT Deregistration in the UAE

Under the UAE VAT Law, businesses and individuals who have applied for VAT in UAE under the Federal Tax Authority (FTA) can opt for VAT Deregistration in the UAE in two different Scenarios.

• In the first instance, suppose you have registered for VAT in UAE and the minimum turnover AED 187,500/- has not exceeded in the next 12 months after you have registered for VAT with the Federal Tax Authority (FTA), in such cases you can apply for VAT Deregistration in the UAE . We provide the VAT Deregistration service.
• In the second instance, if businesses and individuals have initially registered for VAT in the UAE with the FTA but gradually the business stops making taxable supplies, then in such cases as well you can apply for VAT Deregistration in the UAE.

In this case study we will have an overview and a detailed study on VAT Deregistration in the UAE.

VAT Deregistration in the UAE: Fact of the case:

Company Al Khaleel LLC (herein after referred to as “the company”) applied for VAT Registration in the UAE  on “mandatory basis” on 2^nd December 2018 and got the Tax Registration Certificate from the Federal Tax Authority on 20^th December 2018.  Few months after registration, on April 2019 the management decided to liquidate the company. In this regard, what will be the answer in the following cases:

1. Can the company apply for deregistration if the taxable supplies made by it for the past consecutive 12 month is more that AED 375,000/-?

2. Can the company apply for deregistration if the taxable supplies made by it for the past consecutive 12 month is less that AED 375,000/- but more than AED 187,500?

3. Can the company apply for deregistration if the taxable supplies made by it for the past consecutive 12 month is less that AED 187,500?

What would be the answer in the above cases if the company does not liquidate?

Let us understand the relevant provisions in the UAE VAT Law for VAT Deregistration in the UAE.

• Analysis of the Case Study based on the provisions of the UAE VAT Law

Since, the company Al Khaleel LLC decided to liquidate, it is evident that they have stopped making Taxable Supplies. Hence, the company Al Khaleel LLC should apply for de-registration in all the three scenarios as per Article 21(1) of the Decree Law.

• • The application for deregistration should be submitted within 20 business days from the date the company stopped making taxable supplies.
  • The Failure to apply with the FTA for deregistration and/or filing of final tax return or settlement of the payable tax within the deadline would be subject to administrative penalties.

• What if Al Khaleel LLC does not liquidate in the scenarios mentioned above?

1. 1. The company has made taxable supplies of more that AED 375,000/- over the past 12 consecutive months. Therefore, it cannot apply for deregistration from VAT.
   2. Since, the taxable supplies made by the company over the last 12 consecutive months were less that AED 375,000/-. It can apply for deregistration as per the provisions of Article 22 of the Decree law.
   3. Since, the taxable supplies made by the company over the last 12 consecutive months were less that AED 187,500/- and the company does not expect that the total value of taxable supplies and imports subject to reverse charge provisions or the expenses which are subject to tax that will be incurred, will not  exceed the said AED 187,500/- during the coming 30-day period.

Therefore, the company should apply for deregistration as per the provisions of Article 21(2) of the Decree law. And the application for deregistration should be made within 20 business days from the date of on which the taxable supplies falls below AED 187,500/-.

Applicable provisions of the UAE VAT Law:

• As per Article 21 of the Decree Law read with Article 14 of its Executive Regulation:

A Registrant shall apply to the Authority for Tax Deregistration in any of the following cases:

1. 1. If he stops making Taxable Supplies and does not expect to make any such supplies over the next 12month period.
   2. If the value of the Taxable Supplies made over a period of 12 consecutive months is less than AED 187,500/- and said Registrant does not expect that the total value of taxable supplies and imports subject to reverse charge provisions or the expenses which are subject to tax that will be incurred, will not  exceed AED 187,500/- during the coming 30-day period.

• The registrant should apply for deregistration within 20 business days of the occurrence of the conditions mentioned above.

• Further, as per Article 22 of the Decree Law, a registrant may apply to the authority for tax deregistration if the value of his taxable supplies during the past (12) months was less than the AED 375,000/-.
• If the deregistration application is approved, the Authority shall cancel the Tax Registration of the Registrant with effect from the last day of the Tax Period during which the Registrant has met the conditions for deregistration or from such other date as may be determined by the Authority.

• Where a registrant requests to be deregistered from tax due to the reduction of his taxable supplies to less than the mandatory registration threshold, the authority will, if in agreement with the registrant, cancel the tax registration with effect from:

1. 1. the date requested by the registrant in the application; or
   2. the date on which the request is made if the registrant did not indicate the preferred deregistration date

• A Registrant shall not be deregistered unless he has paid all Tax and Administrative Penalties outstanding and filed all due Tax Returns under the Decree-Law and the Federal Law No. (7) of 2017 on Tax Procedures.

As per the guidelines issued by the
Federal Tax Authority  (FTA)  on registration, amendments & Deregistration, if the date of submission of the de-registration form is more than 20 business days from the date the Taxable Person is required to de-register then, a late de-registration penalty of AED 10,000/-  will be levied by the Federal Tax Authority.

Accordingly, if the VAT deregistration application is approved, only then the Federal Tax Authority will cancel the VAT registration of the registrant and will deregister with effect from the last day of the Tax Period during which the Registrant has met the conditions for deregistration or from such other date as may be determined by the Federal Tax Authority.

Looking for TAX Services in the UAE? We provide:

• Tax Agent’s Service
• Pre – Tax Audit
• VAT Return Filing
• VAT Implementation
• VAT Registration
• Excise Tax Registration
• VAT Deregistration