Value Added Tax (VAT) is recently introduced in the UAE. It is a tax imposed on the use of products or services consumed at every point of sale. It is considered an indirect form of tax that is levied to almost 180 countries across the world. The percentage of the VAT is initially kept 5% on all taxable supply of products and services. So, the businesses operating in the UAE are required to register for VAT in order to comply with the rules and regulations.
What is VAT De-Registration?
Tax De-registration is the provision for a registered taxable person to cancel his/her VAT registration. It means de-activation of the registration and the VAT number of the taxable person. Tax deregistration can be applied for by a person registered under VAT or done by the FTA on finding that a person meets the conditions for de-registration.
Reasons and Criteria for Deregistration of VAT
Two years have passed since the introduction of VAT in the UAE and every business here is mostly aware of the importance of VAT registration with the Federal Tax Authority (FTA). However, one crucial process that often gets downplayed by the eligible business is VAT deregistration. VAT Deregistration in UAE is an online process. Businesses and individuals who are registered under the Federal Tax Authority (FTA) can de-register from VAT in two situations:
- 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 persons is different because if a person does not posse taxable products or services while making no profit from anything is liable to deregister from VAT. Other individuals who possess taxable goods and services, but the profitability does not match the taxable threshold can also withdraw their registration for VAT.
VAT Deregistration Criterion for the Tax Group
The tax group is referred to as the taxable entity where two or more people registered collectively under one-person taxable individual. For example, the business is a taxable group that does not fulfil the VAT registration requirements. It can be under the category of VAT exemption or zero VAT. Additionally, an individual who is no longer associated with the taxable group can also deregister for the VAT to exclude from the group. Further, the Federal Tax Authority can also revoke tax group VAT registration.
Process for VAT cancellation or De-Registration
As soon as the business has come up with a justified reason for sending an application for VAT deregistration in UAE, it can then supply the information to the tax authority. The application that is sent to the FTA should also come with 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 registered business fails in applying on time, the fines for the late application also have to be cleared along with the other liabilities of the business. The FTA can cancel a person’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 persons who have registered under VAT but do not continue to make supplies requiring registration. Such persons do not need to continue being registrants and can apply for tax de-registration on satisfying the applicable conditions.
After the furnishing of VAT deregistration application along with the necessary reasons and details to the tax authority, the applicant for VAT deregistration will get a notification from the FTA confirming the submission. After the FTA’s notification for application submission, it will then scrutinize the reasons for the application which is why it is extremely important to supply proof and evidence the business must make it eligible for cancellation. Also, pending penalties, returns status, and tax payments will be reviewed.
VAT Deregistration Penalty
The penalty for the failure in submitting an application for mandatory VAT deregistration in UAE within the stipulated deadline or time frame is Dh 10,000.
Unable to Deal with the Process? Contact Riz and Mona Consultancy
Hopefully, the guide helped you to understand the process of VAT cancellation. You may proceed with the process individually, but it is suggested to get some professional assistance to avoid complications. So, if you are worried about how to do, it is better to acquire the best VAT consultancy in Dubai and entrust the responsibility of foolproof Deregistration for both the individuals and the companies from VAT.
Riz and Mona Consultancy is registered by FTA and will assist you in providing VAT Deregistration services in the UAE. Our financial and accounting experts will help your business to grow by avoiding any fines and penalties by providing the following services:
- VAT Accounting
- 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!