When and Why You Need to Deregister VAT in UAE
VAT deregistration is an important step for businesses and individuals who no longer meet the registration threshold in the UAE. The Federal Tax Authority (FTA) allows VAT-registered businesses to deregister when their yearly turnover does not exceed AED 187,500 in a continuous 12-month period.
Understanding when to deregister VAT helps avoid unnecessary compliance costs and administrative penalties.
When to Apply for VAT Deregistration
VAT deregistration is required when:
- Annual turnover falls below AED 187,500.
- The business stops making taxable supplies.
- The company is closing down operations.
- Voluntary registrants no longer meet the required threshold.
Example: If a business voluntarily registered on 1 January 2018 and by 31 December 2018 did not cross the AED 187,500 threshold, it should apply for deregistration before 20 February 2019.
Why Deregistration is Important
Failing to apply within the given timeframe can attract an administrative penalty of AED 10,000. Deregistration helps companies cut compliance costs and focus on growth rather than unnecessary tax filing.
Benefits of VAT Deregistration
- Lower compliance costs – no need to file VAT returns.
- Competitive pricing – goods and services become cheaper as VAT is no longer charged.
- Simplified accounting – no monthly or quarterly reporting needed.
Key Considerations Before Deregistration
Businesses should carefully evaluate:
Possible price adjustments affecting customer relationships.
VAT on closing inventory (deemed supply tax might be payable).
Future inability to claim VAT on purchases.
The Impact of Deregistration on Business
While deregistration saves costs, it also means VAT charged by suppliers becomes a direct expense. This can increase product prices. Additionally, VAT-registered customers may hesitate to buy from a deregistered supplier, which can affect revenue. Businesses must weigh these factors carefully.
Role of FTA in VAT Deregistration
The FTA actively monitors businesses to ensure that those not meeting registration thresholds are deregistered. Small businesses that registered during the initial VAT rollout in 2018 may now be required to cancel their VAT registration.
Final Thought
VAT deregistration is a crucial compliance requirement for businesses that no longer meet the registration criteria. It reduces unnecessary obligations but requires careful evaluation of inventory, supplier relations, and future tax strategy. As the saying goes, better safe than sorry, so timely deregistration helps avoid penalties and maintain smooth operations.
What Can Help – Mubarak Al Ketbi (MAK) Auditing
Mubarak Al Ketbi (MAK) Auditing helps businesses review VAT eligibility, prepare deregistration applications, and handle FTA requirements to avoid penalties. Our experts guide you through compliance to make sure the process is smooth and stress-free.
- For more information visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Or contact/WhatsApp us: +971 50 276 2132
