The Value Added Tax (VAT) was implemented recently in the UAE. It is a tax charged on the use at each point of sale of the goods or services consumed. It is known to be an informal type of tax imposed by approximately 180 countries worldwide. The VAT percentage is originally maintained at 5% on all taxable suppliers of goods and services. So, in order to conform to the laws and regulations, companies working in the UAE are expected to apply for VAT.
What is VAT De-Registration?
The procedure for a licensed taxable individual to revoke his/her VAT registration is Tax De-registration. It implies the de-activation of the registration and the taxable person’s VAT number. A person registered under VAT or subject to the FTA can apply for a tax de-registration to decide that a person meets the requirements for the de-registration.
Reasons and Criteria for Deregistration of VAT
Two years have passed since VAT was implemented in the UAE, and most companies here are conscious of the value of VAT registration with the Federal Tax Authority (FTA). VAT deregistration is, however, one critical mechanism that the qualifying organization sometimes downplays. VAT Re-registration is an online procedure in the UAE. In two cases, companies and individuals registered under the Federal Tax Authority (FTA) may de-register for VAT:
- If their turnover did not exceed AED 187,500 in the 12 months after registering with the FTA, they must apply for the VAT Deregistration.
- If the business stops making taxable supplies, then they have to apply for VAT deregistration.
VAT Deregistration Criterion for Individuals
The condition for individuals is different since if an individual does not posse taxable goods or services while receiving no benefit on anything is liable to deregister from VAT. Other persons that own taxable products and services, however, the profitability does not match the taxable criterion may also revoke their registration for VAT.
VAT Deregistration Criterion for the Tax Group
The tax category is referred to as the taxable individual under which two or more entities are jointly recorded under the taxable entity of a single individual. For example, a company is a taxable category that does not follow the conditions for VAT registration. This could be under the category of exemption from VAT or nil VAT. In addition, an individual who is no longer connected with the taxable community will also be allowed to deregister in order to remove VAT from the group. In addition, the Federal Tax Authority can also cancel the registration of the tax category VAT.
Process for VAT cancellation or De-Registration
As soon as the company has a legitimate justification for submitting an application for VAT deregistration in the UAE, it can then provide the tax authority with the details. The proposal that is submitted to the FTA may also contain clearances, such as:
- Any outstanding tax against the VAT-registered business;
- Any fines or administrative penalties that are paid in full;
- Returns being filed
If the VAT licensed undertaking fails to apply on time, the late application fines must also be settled along with the undertaking’s other liabilities. The FTA will revoke the registration of an individual if it is noticed that one of the 2 criteria mentioned above for de-registration is met by the registrant. Mandatory tax de-registration is named this. Therefore, for individuals who have registered under VAT but do not continue to render supplies needing registration, VAT de-registration is a welcome choice. Such individuals may not have to continue to be registrants and can, on meeting the relevant requirements, qualify for tax de-registration.
Following the submission to the tax authority of an application for VAT deregistration, along with the requisite reasons and information, the applicant for VAT deregistration will obtain a letter from the FTA verifying the submission. It would also scrutinize the justification for the application after the notification of the FTA for application request, which is why it is highly necessary to include proof and evidence that the corporation must render it suitable for termination. It would also review outstanding fines, the condition of refunds, and tax payments.
VAT Deregistration Penalty
The penalty for failing to file an application for compulsory deregistration of VAT in the UAE within the time limit or time period laid down is Dh 10,000.
Riz and Mona Consultancy
Hopefully, the guide has helped you understand the VAT cancellation process. You may individually continue with the procedure, although it is recommended that you get some professional assistance to prevent complications. So, if you are confused about how to do it, it is safer to seek the best VAT consultant in Dubai and entrust VAT to both individuals and businesses with the duty of foolproof deregistration.
Riz and Mona Consultancy is FTA licensed and can assist you in the provision of UAE VAT Deregistration services. By offering the following facilities, our financial and accounting experts would enable the company to expand by eliminating any fines and penalties:
- VAT Return Filing
- VAT Services
- VAT Consultancy
- VAT Training
- Tax Agent Services
- Tax Audit Services
We will not only advise you on what to do, but our regulated tax agents will also implement the entire VAT cancellation procedure for you!