Thinking You Don’t Need VAT Deregistration in the UAE? Think Again

Thousands of UAE businesses have registered for VAT since 2018, but only a fraction realise that deregistration is just as critical as registration. If your company has ceased operations, dropped below the VAT threshold, or is no longer making taxable supplies, ignoring the VAT deregistration process can become an expensive mistake.

Failing to apply within the 20-day legal window, not filing your final VAT return, or assuming your trade license cancellation automatically cancels your VAT registration can each trigger hefty fines of AED 10,000 or more. This isn’t just a formality; it’s a compliance obligation that can attract audits, penalties, and reputation risks if ignored.

So before you assume you don’t need to deregister for VAT, think again.

1. The Mandatory 20-Day Deadline

Myth: You can deregister anytime.
Reality: The Federal Tax Authority (FTA) mandates that businesses must apply for VAT deregistration within 20 business days of becoming eligible, whether you’ve closed operations or fallen below the taxable threshold. Miss the deadline, and you’re instantly fined AED 10,000.
Even one day late can put you on the FTA’s non-compliance radar.

2. The AED 187,500 Threshold Is Mandatory

Myth: Deregistration is always voluntary if sales drop.
Reality: If your total taxable supplies and imports in the past 12 months fell below AED 187,500 and you do not expect them to exceed this threshold in the next 30 days, deregistration is mandatory, not optional. 

This is the official trigger for compulsory cancellation.

Ignoring it means you’ll keep filing unnecessary VAT returns or worse, incur penalties for inactivity.

3. Business Closure Is a Mandate

Myth: Only low turnover requires deregistration.
Reality: If your business has permanently stopped making taxable supplies and has no plans to resume in the next 12 months, deregistration is compulsory.

Failure to initiate the VAT cancellation process keeps your Tax Registration Number (TRN) active, and your liability too.

4. Outstanding Liabilities Halt the Process

Myth: I can apply now and settle fines later.
Reality: The FTA will reject your deregistration request if you have any pending VAT returns, unpaid tax amounts, or administrative penalties.

Your account must be 100% clear before deregistration is approved.

5. Trade License Cancellation ≠ VAT Deregistration

Myth: Cancelling your trade license automatically cancels your VAT registration.
Reality: These are two separate processes.
Even after license cancellation, you must log into the FTA’s EmaraTax portal and apply for VAT deregistration manually.

Many businesses discover this after they receive a fine for “active VAT registration with no filings.”

6. The Hefty Fine for Late Application

Myth: The penalty is just a minor fee.
Reality: A penalty of AED1,000 applies for failing to apply for deregistration within three months of a cessation, dissolution, liquidation, or other termination event. An additional penalty of AED 1,000 is charged monthly on the same date, up to a maximum of AED 10,000. The AED 10,000 fine for late VAT deregistration is among the highest for administrative delays under UAE tax law.

FTA’s system is automated, meaning any missed 20-day window triggers a penalty instantly.

7. The Final VAT Return Is a Must

Myth: Filing stops once the deregistration form is submitted.
Reality: You must continue filing VAT returns until FTA pre-approves your deregistration.

Once approved, you’re required to file a Final VAT Return covering the period from your last submission to the deregistration effective date.

Skipping this step = more fines and delayed clearance.

8. Temporary Suspension Is Not Eligibility

Myth: My business is on hold, so I can deregister.
Reality: If your operations are only temporarily suspended, you must continue to file NIL VAT returns.

Only when your business has ceased taxable activities permanently can you apply for deregistration.

9. The Audit Trigger

Myth: VAT deregistration is just paperwork.
Reality: Submitting a deregistration request gives the FTA full authority to review your tax history and initiate an audit.

They may cross-check:

• Previous VAT returns
• Outstanding liabilities
• Reported turnover and claimed inputs

If inconsistencies appear, the audit begins before deregistration is approved.

10. VAT Groups Aren’t Exempt

Myth: Deregistration only applies to individual entities.
Reality: If a Tax Group no longer meets grouping criteria, for example, due to loss of financial control or shared ownership, the group must deregister or remove members.

The same deadlines and penalties apply.

11. Complex Supporting Documentation

Myth: A declaration letter is enough.
Reality: The FTA may request:

• License cancellation certificate
• Liquidation documents
• Audited financial statements (P&L, Balance Sheet)
• Proof of ceased operations or low turnover

Incomplete documentation = rejected deregistration.

12. The AED 375,000 Trap

Myth: Dropping below AED 375,000 is always mandatory.
Reality: Falling below the mandatory registration threshold (AED 375,000) only gives you the option for voluntary deregistration (provided you have been VAT-registered for at least 12 months). The compulsory trigger for low sales is the much lower AED 187,500 threshold.

The mandatory trigger is AED 187,500 or complete business closure.

13. Post-Deregistration Record Keeping

Myth: I can delete or discard VAT records once deregistered.
Reality: You’re legally required to maintain all VAT-related records for 5 years after deregistration.

FTA can audit past filings anytime within that window.

14. Pre-Clearance Requirements

Myth: VAT deregistration is only about taxes.
Reality: For full company closure, the FTA may request evidence that you’ve cleared:

• Employee end-of-service benefits
• Pending salaries
• Legal settlements

VAT deregistration is often linked to liquidation compliance.

15. The Date of Eligibility Is Crucial

Myth: The FTA decides the effective date.
Reality: The date of eligibility, when taxable supplies stopped or turnover fell below the threshold, must be clearly mentioned in your application.

FTA uses it to calculate compliance deadlines and fines.
Provide inaccurate or missing dates, and your deregistration could be rejected.

Final Thought: VAT Deregistration Is Not Optional; It’s a Compliance Obligation

VAT deregistration in the UAE isn’t just an administrative closure; it’s a legal requirement that protects your business from unnecessary penalties and future audits.

Whether your business has ceased operations, fallen below the VAT deregistration threshold, or is undergoing liquidation, the 20-day window is your lifeline to avoid fines.

At Vista Financials Accounting & Taxation, our VAT consultants manage the entire VAT cancellation process, from eligibility checks and documentation to final VAT return filing and FTA clearance.

We ensure:
✅ On-time deregistration submission
✅ 100% compliance with FTA rules
✅ Zero penalties or delays

Book your free VAT consultation today, before compliance turns into a costly mistake.