When is VAT Deregistration Required and How to Do It?

Introduction

In the UAE, businesses registered for VAT must understand not only when to register but also when to deregister from the system. VAT deregistration is as important as registration, and failing to comply with deregistration rules can result in penalties from the Federal Tax Authority (FTA).

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1. What is VAT Deregistration?

VAT deregistration refers to the formal process of cancelling a business’s VAT registration with the FTA. Once deregistered, the business is no longer required to charge VAT, file returns, or maintain VAT records—except for prior obligations.

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2. When is VAT Deregistration Required?

There are two main scenarios:

✅ Mandatory VAT Deregistration

You must apply for deregistration within 20 business days if:

• Your taxable turnover in the last 12 months fell below AED 187,500 and is not expected to exceed this in the next 30 days.

• Your business stopped making taxable supplies (e.g., ceased trading or changed activities).

Failure to apply within the time limit may result in a penalty of AED 1,000, increasing to AED 10,000 for repeated violations.

✅ Voluntary VAT Deregistration

If your taxable turnover is below AED 375,000 but still above AED 187,500, and you do not wish to stay VAT registered, you may apply for voluntary deregistration.

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3. Who Can Apply for VAT Deregistration?

• Individual businesses

• VAT groups (if no longer eligible to remain as a group)

• Agents acting on behalf of a business with valid Power of Attorney

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4. How to Apply for VAT Deregistration?

You can apply online through the FTA e-Services portal:

📝 Steps:

1. Login to your FTA account

2. Navigate to VAT > VAT Deregistration

3. Fill the VAT deregistration form

4. Provide reasons and attach supporting documents (like a business closure letter)

5. Submit the application

The FTA typically reviews and may request clarification before approving.

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5. After Deregistration Approval

• You’ll receive a VAT Deregistration Certificate

• You must settle any outstanding VAT returns and payments

• Maintain VAT records for at least 5 years post-deregistration

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6. Key Considerations

• Do not stop filing VAT returns until deregistration is approved

• Ensure all due VAT is paid before applying

• Keep supporting documentation ready (bank closures, license cancellations, etc.)

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Conclusion

VAT Deregistration in the UAE is a critical compliance process that businesses must take seriously. Whether you no longer meet the taxable threshold or are winding up operations, it's vital to follow the correct procedure to avoid penalties.

For professional help with your VAT deregistration process, contact the VAT experts at Sheikh Anwar Accounting and Auditing LLC.