The UAE introduced Value Added Tax (VAT) on January 1, 2018, as part of its economic diversification strategy. With a standard VAT rate of 5%, it’s one of the lowest globally. VAT applies to most goods and services, aiming to boost public sector revenue and reduce reliance on oil income.

Businesses in Dubai must file for VAT if their annual turnover exceeds AED 375,000, while those earning between AED 187,500 and AED 375,000 have the option to voluntarily file.

Once VAT filing is completed, businesses must charge VAT on their sales, collect it from customers, and file regular VAT returns detailing taxable sales and input tax (VAT paid on purchases).

VAT compliance is a critical aspect for businesses, as the Federal Tax Authority (FTA) enforces strict rules and penalties for non-compliance. To minimize tax liabilities, businesses can reclaim VAT paid on purchases through the input tax recovery system, ensuring that only the final consumer bears the tax burden.

Types of VAT Deregistration

Mandatory VAT Deregistration

A business must apply for deregistration if:

• The company stops making taxable supplies completely
• The business closes permanently
• Taxable turnover falls below the mandatory VAT registration threshold

Voluntary VAT Deregistration

A business may apply voluntarily if:

• Taxable supplies fall below the voluntary registration threshold
• The company no longer wishes to remain VAT registered

Benefits of VAT Deregistration

Compliance with UAE Tax Laws

Proper VAT deregistration ensures your business remains compliant with FTA regulations and avoids legal complications.

Avoid Unnecessary VAT Filing

Once deregistered, businesses are no longer required to submit periodic VAT returns.

Reduce Administrative Burden

VAT deregistration simplifies accounting and tax management for businesses that no longer require VAT registration.

Prevent Penalties

Timely deregistration helps businesses avoid penalties for late filings or non-compliance.

VAT Deregistration Process

1. Review Eligibility

Businesses must determine whether they qualify for mandatory or voluntary VAT deregistration.

2. Prepare Required Documents

Necessary financial records and supporting documents are collected for submission.

3. Submit Deregistration Application

The VAT deregistration request is submitted through the UAE Federal Tax Authority (FTA) portal.

4. Settle Outstanding Tax Liabilities

Any pending VAT returns, penalties, or tax payments must be cleared before approval.

5. Receive Approval

Once approved by the FTA, the company’s VAT registration is officially canceled.