Tax De-registration is the provision for a registered taxable business or entity to cancel the VAT registration. It implies de-activation of the registration as well as the VAT number of the taxable entity. There are two conditions under which a business can apply for VAT de-registration in UAE:
a. The business stops making taxable supplies and does not expect to make any taxable supplies over the following12-month period.
b. The taxable supplies or taxable expenses incurred by the business over a period of 12 consecutive months compares to be less than the voluntary registration threshold (AED 187,500) and it is not expected to cross this threshold in the following 30 days.
An important information regarding the same is that a business/entity that had voluntarily registered under VAT is not allowed to apply for de-registration in the following 12 months of the date of VAT registration.
Process of De-registration Under VAT in UAE
The process for de-registering under VAT is described as the following:
- The company or business or any taxable entity can file for deregistration of VAT within 20 business days of occurrence of any of the two events mentioned above. What you need to ensure is that the due tax and penalties have all been paid. All the tax related formalities should be complete before you can deregister for VAT.
- Once the application for deregistration gets approved, the VAT registration for the business would be cancelled with effect from last day of the tax period during which the event for de-registration had occurred or alternatively from a date decided by FTA. The registrant should ideally receive a notification on successful de-registration of VAT within 10 business days of the application getting approved.
What is Mandatory Tax De-registration?
Mandatory VAT de-registration is the phenomenon where the FTA cancels a business’s registration if it is found that the registrant satisfies either of the 2 conditions listed above for de-registration. This is called mandatory tax de-registration.
Hence, VAT de-registration is a welcome option for businesses that have registered under VAT but do not continue to make supplies that require registration. Such people/businesses do not require continuing with their registration of VAT and can apply for tax de-registration on satisfying the applicable conditions.
Importance of VAT Deregistration
As per the rules, a company cannot be dissolved officially until the process of VAT deregistration has been completed.
Moreover, it is also vital to inform the concerned authorities that there will no more be taxable income in the future after company dissolution. In case the company will not inform the authorities, it could result in major objections with respect to company dissolution. Moreover, unnecessary delays might also occur, involving extra fees at the same time.
While dissolving a company, it is essential to be well-informed and take the necessary steps towards completing the proceedings. It is also important to keep the concerned parties informed so that there are no issues.