VAT deregistration is simply the process of terminating VAT registration. Nevertheless, in the UAE, deregistration of VAT is when a business cancels its VAT registration with the Federal Tax Authority (FTA). The reasons could be multiple for a formerly taxed corporation or an individual to elect VAT deregistration. Whys and wherefores must strictly fall under the conditions stated by the Law related to VAT. Unless the reasons are legally valid and the conditions are satisfied, the FTA might condemn the submission to VAT deregistration.
Entrepreneurs (corporations or individuals) must know the guidelines and processes for VAT cancellation in UAE, as administrative consequences will be obligated upon failure to file an application within the specified timeline.
Stop dealing in taxable goods and services OR,
The taxable provisions or expenditures in the previous 12 months and the future 30 days do not surpass the voluntary registration threshold (i.e. AED.187,500.)
If a business or an individual who was a registered as taxpayer with FTA, fulfils to these criteria’s, it must not postpone in applying for deregistration of VAT to avoid any penalties.
Once an FTA registered entity becomes eligible for VAT deregistration as stated above, they have a time limit of only 20 business days from the time this eligibility occurred. Failing to apply within the given time will root to a financial loss due to fines as a penalty for late application.
If any company or individual has registered for VAT under the guidelines of FTA:
Is still trading with the taxable services and goods, but for the past 12 months the supplies or expenses were under the compulsory VAT registration threshold (i.e. AED. 375,000.), and if, 12 months have been conceded since the entity was registered with FTA under voluntary registration.
In such a scenario, the entity may apply for Voluntary deregistration of VAT. There is deadline for the number of days to request for FTA deregistration.
When an individual or a company has conformed for VAT deregistration, then the VAT deregistration form requires to be completed. This form is available once logged onto the FTA portal.
The resolution of FTA to accept the application for deregistration of VAT is contingent on the provided reason as well as the clearance of all:
Late submission can be made but the consent from FTA for VAT deregistration will be restrained unless all the liabilities along with the late submission fine have been paid.
Even if a valid reason has been stated, the approval from FTA will still display the status of the application as “Pre-Approved” and be considered complete only when all the above-mentioned liabilities have been cleared.
The consequence for neglecting to apply for a mandatory de-registration of VAT within the specified timeframe i.e. within 20 business days, from the occurrence of the event causing the taxable company to get qualified for tax deregistration, is AED 10,000.
After completing the form given online, with the relevant details, it must be submitted electronically. The company or individual deregistering for VAT will receive an SMS confirmation on the registered mobile number.
The FTA will evaluate the application which includes the status of returns, any pending fines or tax payments. If all the criteria’s have been met according to FTA guidelines, without any errors, the VAT registration will be successfully cancelled.
The FTA will deregister VAT, operative from the ending date of the last tax period when the company qualified for cancellation of VAT.
The procedure for VAT deregistration in UAE for the groups is the same as that of individuals. The only difference is in the criteria stated for groups that were registered for VAT.
In addition to mandatory conditions being fulfilled, the groups require to have the following reasons in order to qualify for VAT deregistration:
FTA will accept the termination of VAT registration for a group if the entity no longer meets the requirement to be considered as a group.
FTA also approves VAT deregistration for the group if the companies in the group are no longer financially allied with the group.
FTA can also take the initiative to cancel the VAT registration of a group if it foresees their tax status which may result in any kind of tax evasion.
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