Your UAE company’s revenue dropped below AED 375,000 last year. You’re wondering whether you need to cancel your VAT registration – and what happens if you don’t.
Here’s what happens: the FTA charges you AED 10,000 for late deregistration.
VAT deregistration in the UAE is the formal process of cancelling your Tax Registration Number (TRN) with the Federal Tax Authority. It’s not automatic. It doesn’t happen when you close your trade license or stop invoicing clients. You have to apply for it – and if you’re required to apply, you face a hard deadline.
What is VAT deregistration in the UAE?
VAT deregistration – also referred to as VAT cancellation in the UAE – is the process by which a VAT-registered person or business applies to the FTA to cancel their TRN. Once approved, you’re no longer obligated to charge, collect, or remit VAT.
But here’s the misconception most businesses have: UAE VAT deregistration does not mean your tax obligations disappear overnight. You must file all outstanding returns, pay any liabilities, and account for deemed supply on remaining assets before the process is complete.
The legal basis sits in Federal Decree-Law No. 8 of 2017 on Value Added Tax and Cabinet Decision No. 52 of 2017 (Executive Regulations).
Who is eligible for VAT deregistration?
Eligibility depends on whether your situation triggers mandatory deregistration or qualifies for voluntary deregistration. The FTA distinguishes between the two, and getting this classification wrong is one of the top reasons applications are rejected.
Mandatory VAT deregistration
Two conditions trigger mandatory deregistration:
- The taxable person no longer makes any taxable supplies (the business has completely ceased taxable activities)
- The business has permanently closed
You have 20 business days from the date the triggering condition is met to submit your FTA VAT deregistration application. This is not optional. Missing this deadline triggers the AED 10,000 penalty.
Voluntary VAT deregistration
Two tests determine VAT deregistration eligibility for voluntary cases:
- Backward-looking test: Taxable supplies and imports over the past 12 months fell below AED 375,000
- Forward-looking test: Taxable supplies and imports are not expected to exceed AED 375,000 in the next 30 days
Either test qualifies you.
If a business was voluntarily registered and its taxable supplies fall below AED 187,500 (based on the past 12 months and expected next 30 days), it is generally required to apply for VAT deregistration.
One strategic note worth considering: voluntary deregistration is an option, not an obligation. Some businesses choose to stay registered even below the VAT deregistration threshold because it allows them to continue recovering input VAT on purchases. This is a legitimate tax planning consideration.
VAT deregistration thresholds explained
Three threshold figures determine your deregistration eligibility. Understanding which one applies to you is the first step.
| Threshold | Amount | Who It Applies To | Deregistration Type |
| Mandatory registration threshold | AED 375,000 | Mandatorily registered businesses whose supplies dropped below this | Voluntary deregistration |
| Voluntary registration threshold | AED 187,500 | Voluntarily registered businesses whose supplies dropped below this | Voluntary deregistration |
| Complete cessation | AED 0 | Any registered business that stops all taxable activities | Mandatory deregistration |
When calculating taxable supplies for threshold purposes: include standard-rated and zero-rated supplies. Exclude exempt supplies. Two measurement windows apply – the backward-looking 12-month period and the forward-looking 30-day projection.
Step-by-step process to deregister for VAT in the UAE
The entire VAT deregistration process is handled through the FTA’s Emara Tax portal and typically involves seven steps. Having your documents ready before you start saves significant time.
Step 1 – Assess your eligibility
Before touching the portal, confirm your deregistration type:
- Confirm whether mandatory or voluntary deregistration applies (review thresholds above)
- Check for outstanding VAT returns, unpaid penalties, or pending FTA audits – these must be resolved first
- Verify no pending audits exist on your account
- If part of a tax group, confirm whether the group itself is deregistering or just one member
Step 2 – Gather required documents
Direct your attention to the full document checklist in the next section. Gather everything before starting the online VAT deregistration application – this prevents timeouts and incomplete submissions.
The most commonly missing document? A stock and asset inventory with current market valuations. You’ll need it for deemed supply calculation.
Step 3 – Log into the EmaraTax portal
Navigate to tax.gov.ae → click “EmaraTax” → log in with your registered email and password → go to “My Registrations” or “VAT” → locate the “Deregistration” option.
Only the authorized signatory or a registered tax agent can submit the application. If your business uses a tax agent, the agent submits on your behalf through their own EmaraTax agent account.
Step 4 – Complete the deregistration application form
Key fields you’ll need to complete:
- Reason for deregistration (select from dropdown – business closure, revenue below threshold, etc.)
- Effective date of cessation (if applicable)
- Total taxable supplies for the past 12 months
- Value of stock and capital assets on hand at the deregistration date (feeds the deemed supply calculation)
Upload all supporting documents in PDF format, under 5MB per file. Accuracy matters – incorrect figures are a top reason for FTA rejection.
Step 5 – Submit and track your application
After reviewing all fields and uploads, submit. The portal generates a reference number – save it.
Track status through the EmaraTax dashboard under “My Requests.” The FTA may come back with queries or requests for additional documents. Respond within 5 business days to avoid the application being closed or delayed.
Step 6 – File your final VAT return
This step trips up many businesses. You must continue filing VAT returns for every tax period until the FTA formally approves the deregistration. The final VAT return must include the deemed supply output VAT on any stock and assets on hand.
Any outstanding VAT liability must be paid with or before the final return. Failure to file triggers the standard late-filing penalty: AED 1,000 for the first month, AED 2,000/month thereafter, up to AED 10,000.
Step 7 – Receive deregistration confirmation
Once the FTA approves, they issue a formal deregistration confirmation through the EmaraTax portal. The effective deregistration date is specified in the confirmation.
Documents required for VAT deregistration in the UAE
The FTA requires supporting documents to verify your eligibility and ensure all tax obligations are settled. Here’s the master checklist covering VAT deregistration requirements:
- Valid trade license (or trade license cancellation certificate if the business is closed)
- Emirates ID and/or passport copy of the authorized signatory
- Board resolution or power of attorney authorizing the deregistration application (for companies)
- Financial statements or management accounts for the past 12 months
- VAT return filing history (confirmation that all returns have been filed – screenshot from EmaraTax)
Understanding deemed supply on VAT deregistration
When you deregister for VAT, any goods (stock, inventory) and capital assets (equipment, vehicles, furniture) that you still hold – and on which you previously claimed input VAT – are treated as if you “sold” them to yourself at their current market value on the deregistration date.
This means you owe output VAT (5%) on that market value. It’s payable in your final VAT return.
Penalties for late or incorrect VAT deregistration
The VAT deregistration penalty structure in the UAE is straightforward – and entirely avoidable with proper planning.
| Violation | Penalty | Legal Reference |
| Late deregistration application (mandatory) | AED 10,000 | Cabinet Decision No. 40 of 2017 |
| Late VAT return filing | AED 1,000 (1st month), AED 2,000/month thereafter, max AED 10,000 | Cabinet Decision No. 40 of 2017 |
| Incorrect tax return (e.g., omitting deemed supply) | Percentage-based penalty on undeclared tax | FTA Administrative Penalties |
| Failure to pay VAT due | 2% immediately + 4% on the 7th day + 1%/daily (max 300%) | Cabinet Decision No. 40 of 2017 |
The FTA enforces these through automatic assessment via the EmaraTax system, notification through the portal and registered email, and potential escalation to audit.
If you believe a penalty was applied unfairly, you can submit a reconsideration request to the FTA within 40 business days of being notified. If that’s rejected, escalate to the Tax Disputes Resolution Committee (TDRC).
Common mistakes that lead to VAT deregistration rejection
Based on common patterns seen in practice, here are the most frequent reasons the FTA rejects or delays VAT deregistration applications:
- Applying before settling outstanding returns and payments. The FTA will not process your application while liabilities are open. Clear everything first.
- Incorrectly calculating taxable supplies. Including exempt supplies or excluding zero-rated supplies skews your threshold calculation. Review the threshold section above.
- Failing to account for deemed supply on assets. This omission in the final return triggers audits and penalties for under-declaration. Calculate it before filing.
Final VAT return filing
The final VAT return must cover the period up to the effective deregistration date and must include deemed supply. If it shows a VAT liability, pay it by the due date.
If it shows a refund position (excess input VAT), you can claim a refund through the EmaraTax portal – but expect additional FTA scrutiny and longer processing time for refund claims submitted alongside deregistration.
Record retention requirements
All VAT records – invoices, credit notes, import/export documents, accounting records, bank statements, contracts – must be retained for a minimum of 5 years from the end of the tax period to which they relate.
For real estate transactions, the retention period is 15 years. Records can be kept in electronic format. Even though you’re no longer VAT-registered, the FTA retains the right to audit past periods.
How long does VAT deregistration take?
The FTA’s official stated processing time: approximately 20 business days from submission of a complete application.
In practice, the VAT deregistration timeline ranges from 2 to 8 weeks depending on several factors.
VAT deregistration for different entity types
The core deregistration process is the same for all entity types, but specific requirements and complications vary. Here’s what to know based on your business structure.
Mainland companies (LLC, sole establishment)
Standard process as outlined above. The key coordination point: some licensing authorities (DED/DET) require proof of VAT deregistration before processing license cancellation, while the FTA may want the license cancellation certificate as part of the deregistration application.
Freezone companies
Freezone entities face an additional layer. Many freezones require their own clearance letter or NOC before the FTA will process the deregistration. Requirements vary by freezone – DMCC, JAFZA, DAFZA, IFZA, and others each have their own procedures.
Freelancers and sole proprietors
Generally a simpler process with fewer documents. No board resolution, no complex corporate structure. Freelancers who registered voluntarily can deregister if supplies fall below AED 187,500.
Tax groups
Tax group deregistration is the most complex scenario. If the entire group is dissolving, all members must be deregistered. If one member is leaving, that member may need to register individually if it continues making taxable supplies above the threshold.
Managing VAT deregistration, deemed supply calculations, and FTA compliance can be complex. Explore our VAT Compliance Services in UAE for expert support with VAT filing, deregistration, and FTA documentation.
Frequently Asked Questions (FAQ’s)
How long does VAT deregistration take in the UAE?
The FTA officially states approximately 20 business days for complete applications, but realistic timelines range from 2 to 8 weeks. The three biggest factors affecting speed are completeness of documents, whether outstanding returns and payments are cleared, and how quickly you respond to FTA queries. Clearing all obligations before applying is the single best way to speed up the process.
Can I re-register for VAT after deregistration in the UAE?
Re-registration is possible when taxable supplies exceed AED 375,000 (mandatory) or AED 187,500 (voluntary). There’s no formal cooling-off period in the law, but the FTA may scrutinize businesses that deregister and quickly re-register. If you expect the revenue dip to be temporary, consider VAT suspension as an alternative to avoid the full re-registration process.
Do I need to file a final VAT return before deregistering?
You must continue filing all VAT returns until the FTA formally approves the deregistration – not just when you submit the application. The final return must include deemed supply output VAT on any stock and assets on hand. Failure to file triggers the standard late-filing penalty of AED 1,000 for the first month, escalating to AED 2,000/month thereafter.
What is the penalty for late VAT deregistration in the UAE?
The FTA imposes an AED 10,000 administrative penalty for failing to apply for mandatory deregistration within 20 business days of the triggering event. Additional late-filing penalties apply if you miss VAT return deadlines during the deregistration process. Penalties can be challenged through the FTA’s reconsideration process within 40 business days of notification.
What happens to my TRN after VAT deregistration?
Your TRN is permanently cancelled and must be removed from all invoices, contracts, and official documents. You must stop charging VAT from the effective deregistration date – charging VAT after cancellation creates a liability even though you’re no longer registered. The TRN remains on record with the FTA, and all associated records must be retained for at least 5 years (15 years for real estate).
Reach out to our experts at info@bcl.ae.
