In the realm of taxation in the United Arab Emirates (UAE), VAT De-registration stands as a significant procedure allowing registered individuals to terminate their VAT registration with the Federal Tax Authority (FTA). This entails the deactivation of the registration and the associated VAT number. Whether initiated by the individual or mandated by the FTA, the process of de-registration follows specific criteria and conditions set forth by the UAE’s VAT regulations.
Understanding Eligibility for VAT De-Registration
VAT De-registration in the UAE holds equal importance to VAT registration. Various factors may prompt a business or individual to seek de-registration. However, the reasons for de-registration must align with the stipulated conditions outlined by the VAT laws. Failure to meet these conditions may lead to rejection of the de-registration application by the FTA.
Qualifying for Mandatory VAT De-Registration
The UAE VAT regulations, under the authority of the Federal Tax Authority, dictate specific criteria that must be met for mandatory VAT de-registration:
1. Mandatory VAT De-Registration:
- Ceasing Business Operations: If a business or individual ceases to make taxable supplies and doesn’t foresee any such supplies in the upcoming year, they must apply for VAT de-registration.
- Threshold Requirement: If the total value of taxable supplies made over a consecutive 12-month period is less than AED 187,500, or if the initial 12-month value is below the Voluntary Registration Threshold (AED 187,500) with no anticipation of surpassing this threshold in the next 30 days, VAT de-registration is necessary.
Time Frame for VAT De-Registration
Applicants for de-registration must submit their requests within 20 workdays from the occurrence of the qualifying conditions. Failure to meet this deadline may result in penalties imposed by the Federal Tax Authority.
Penalties for Delayed De-Registration
According to FTA regulations, late submission of the de-registration form beyond the specified time frame incurs a penalty of AED 10,000. It’s imperative for VAT registrants to promptly assess their eligibility for de-registration to avoid such penalties.
Opting for Voluntary VAT Deregistration
Entities registered for VAT in the UAE can voluntarily apply for de-registration if they meet certain conditions:
- Threshold Criteria: If the value of taxable supplies in the past year was below the Mandatory Registration Threshold (AED 375,000), and a year has elapsed since voluntary registration, de-registration can be pursued.
No Specific Deadline for Voluntary VAT De-Registration
Unlike mandatory de-registration, there’s no set deadline for voluntary de-registration with the Federal Tax Authority. Entities may initiate the process as per their discretion and eligibility.
De-Registration for VAT Groups
Similar to individual entities, VAT groups are subject to de-registration eligibility. However, additional criteria apply:
- Group Dissolution: VAT de-registration for groups is sanctioned if the group no longer meets the criteria for group status.
- Financial Disconnection: De-registration may be granted if constituent companies within the group are no longer financially linked.
- Risk of Tax Evasion: FTA may approve de-registration if the tax status of the group poses risks of tax evasion.
Process of VAT De-Registration in the UAE
To initiate VAT de-registration in the UAE, registered entities must adhere to the following procedures:
- Assess Eligibility: Confirm eligibility based on stipulated criteria.
- Online Submission: Access the VAT Account on the FTA Portal and fill out the VAT de-registration form with relevant details and reasons.
- Electronic Submission: Electronically submit the form through the portal.
- Confirmation: Receive SMS confirmation on the registered number post-submission.
- FTA Review: FTA reviews the application, and if approved, changes the status to ‘Pre-Approved’.
- Final Obligations: Submit the final VAT Return Filing and clear any outstanding liabilities to complete the de-registration process.
- Notification: Receive email and SMS notifications regarding the application status and instructions for clearing outstanding liabilities.
Upon approval, the FTA will officially cancel the VAT registration, effective from the last day of the tax period meeting the de-registration conditions.
In conclusion, understanding the intricacies of VAT de-registration is crucial for businesses and individuals in the UAE to ensure compliance with tax regulations and avoid penalties. By following the prescribed procedures and meeting eligibility criteria, entities can smoothly navigate the process of terminating their VAT registration.