VAT Deregistration Rules UAE Explained for Businesses

Why VAT Deregistration Matters More Than You Think

For many UAE businesses, VAT registration feels like a milestone. It signals growth, compliance, and legitimacy in the eyes of customers and authorities. But what happens when your business model changes, turnover drops, or operations stop altogether? That is where VAT deregistration in the UAE becomes critically important.

VAT deregistration is not just a formality. It is a legal obligation governed by the Federal Tax Authority (FTA). Businesses that no longer meet VAT registration requirements must formally cancel their VAT registration. Failing to do so can result in fines, penalties, blocked tax accounts, and complications with trade license renewals or company liquidation.

Many business owners assume VAT registration automatically becomes inactive when sales slow down or when a company stops operating. That assumption often leads to costly mistakes. The FTA continues to expect VAT returns, even if your business is dormant or generating zero revenue, until VAT deregistration is officially approved.

In the UAE, VAT deregistration is closely linked with other compliance areas such as trade license status, company liquidation, VAT return filings, and final tax liabilities. Whether you are a mainland company registered with the Department of Economy and Tourism (DET), a Free Zone entity, or an offshore structure, VAT deregistration rules apply differently based on your situation.

This guide explains VAT deregistration rules for UAE businesses in clear, practical language. You will learn when VAT deregistration is mandatory, when it is voluntary, how to cancel VAT registration with the FTA, what documents are required, expected timelines, common mistakes, and how professional support can save you time and penalties.

If you are considering cancelling VAT registration in the UAE, this article will help you make the right decision with confidence.

What Is VAT Deregistration in the UAE?

VAT deregistration in the UAE is the official process of cancelling a business’s VAT registration with the Federal Tax Authority. Once approved, the business is no longer required to charge VAT, file VAT returns, or maintain VAT related records, except for statutory retention periods.

VAT deregistration applies in three main scenarios:
• When a business no longer meets the VAT registration threshold
• When taxable supplies stop permanently
• When a company is closing or undergoing liquidation

It is important to understand that VAT deregistration is not automatic. Even if your trade license expires, business activity stops, or bank accounts are closed, your VAT account remains active until the FTA approves deregistration.

The FTA distinguishes between mandatory VAT deregistration and voluntary VAT deregistration, each with specific conditions and timelines.

Why VAT Deregistration Matters in the UAE Context

VAT compliance in the UAE is tightly monitored and digitally enforced. The FTA shares compliance data with other authorities such as:
• Department of Economy and Tourism (DET)
• Free Zone Authorities
• Ministry of Economy
• Customs Authorities

If your VAT status does not align with your business activity or license status, it raises red flags across multiple government systems.

Here is why VAT deregistration matters:
• Avoids penalties for late VAT return filing
• Prevents fines for non-compliance after business closure
• Ensures smooth company liquidation or license cancellation
• Protects directors and shareholders from compliance issues
• Maintains a clean compliance record for future business ventures

For example, a Dubai mainland company that stops trading but fails to cancel VAT registration will continue to receive VAT return filing obligations. Missing those filings leads to penalties, even if revenue is zero.

VAT deregistration is also a mandatory step during company liquidation in the UAE, which we frequently handle for clients at Nines Consultancy.

Types of VAT Deregistration in UAE

Mandatory VAT Deregistration

VAT deregistration becomes mandatory when:
• Taxable turnover falls below AED 187,500 in the last 12 months
• Business activities permanently cease
• The company is legally liquidated or deregistered

Once the condition is met, the business must apply for VAT deregistration within 20 business days.

Failure to apply on time can result in administrative penalties imposed by the FTA.

Voluntary VAT Deregistration

VAT deregistration is voluntary when:
• Taxable turnover falls below AED 375,000 but above AED 187,500
• The business expects low turnover for the next 12 months

In this case, the business can choose whether to remain VAT registered or apply for cancellation, depending on commercial considerations.

VAT Deregistration Thresholds in UAE

Understanding VAT thresholds is essential before cancelling VAT registration.

Category	Amount
Mandatory registration threshold	AED 375,000
Voluntary registration threshold	AED 187,500
Mandatory deregistration threshold	Below AED 187,500

If your taxable supplies drop below AED 187,500 over the last 12 months, VAT deregistration becomes compulsory.

Step by Step Process to Cancel VAT Registration in UAE

Step 1: Review Eligibility

Before applying, confirm whether VAT deregistration is mandatory or voluntary. This includes reviewing:
• Last 12 months taxable turnover
• Business activity status
• Trade license validity
• Future business projections

Step 2: File All Pending VAT Returns

The FTA will not approve VAT deregistration if:
• VAT returns are pending
• VAT liabilities remain unpaid
• Penalties are unresolved

All VAT filings must be completed up to the date of deregistration.

Step 3: Prepare Supporting Documents

Common documents required include:
• Trade license copy
• Emirates ID of authorized signatory
• Financial records showing turnover
• Company liquidation documents if applicable
• Final VAT return details

Step 4: Submit VAT Deregistration Application on FTA Portal

The application is submitted through the FTA e-Services portal, where you must:
• Select VAT deregistration reason
• Enter effective deregistration date
• Upload supporting documents

Step 5: Respond to FTA Clarifications

The FTA may request additional documents or clarification. Prompt response helps avoid delays.

Step 6: Receive VAT Deregistration Approval

Once approved, the FTA issues a deregistration confirmation, and VAT obligations officially end.

VAT Deregistration Timeline in UAE

• Application submission: Immediate
• FTA review period: 20 to 40 business days (average)
• Final approval: Subject to compliance clearance

Timelines may vary based on complexity, pending liabilities, or liquidation status.

Cost of VAT Deregistration in UAE

The FTA does not charge a direct fee for VAT deregistration. However, indirect costs may include:
• Outstanding VAT liabilities
• Late filing penalties
• Professional consultancy fees

At Nines Consultancy, we always clarify that costs mentioned are indicative only. Actual costs vary depending on business size, VAT history, penalties, and documentation status.

Common Mistakes Businesses Make When Cancelling VAT in UAE

• Assuming VAT registration cancels automatically
• Missing the 20-day deregistration deadline
• Applying without filing final VAT returns
• Choosing incorrect deregistration reason
• Ignoring penalties before application

These mistakes often lead to rejections or compliance complications.

VAT Deregistration and Company Liquidation in UAE

VAT deregistration is a mandatory part of company liquidation. The sequence matters:
1. Clear VAT liabilities
2. File final VAT returns
3. Apply for VAT deregistration
4. Proceed with trade license cancellation

This process is especially important for mainland companies in Dubai, Abu Dhabi, Sharjah, and Ajman.

You can learn more through our Company Liquidation Services page.

Why Choose Nines Consultancy for VAT Deregistration in UAE

VAT deregistration is not just paperwork. It is a compliance-sensitive process that impacts your company’s legal standing.

At Nines Consultancy, we offer:
• End to end VAT deregistration handling
• FTA compliance checks before submission
• Penalty review and resolution support
• VAT deregistration aligned with liquidation or restructuring
• Transparent guidance with no hidden steps

Our team works directly with the FTA portal and UAE authorities to ensure smooth, penalty-free VAT cancellation.

Call us: +971529757543
WhatsApp: +971529757543

Frequently Asked Questions (FAQ)

Can I cancel VAT registration if my business is inactive?

Yes. If your business has stopped taxable activities, VAT deregistration is mandatory. You must still file VAT returns up to the deregistration date.

How long does VAT deregistration take in UAE?

Typically 20 to 40 business days, depending on FTA review and compliance status.

Is VAT deregistration required for company liquidation?

Yes. VAT deregistration is a mandatory step before completing company liquidation in the UAE.

Can I apply for VAT deregistration with penalties?

You can apply, but the FTA may require penalties to be cleared before approving deregistration.

Does VAT deregistration affect future business setup?

No, if done correctly. Proper VAT deregistration maintains a clean compliance record for future registrations.

Cancel VAT the Right Way, Not the Risky Way

VAT deregistration in the UAE is a compliance obligation, not an option to ignore. Whether your turnover has dropped, your business model has changed, or your company is closing, timely VAT deregistration protects you from penalties, legal issues, and operational delays.

The key is understanding when to deregister, how to deregister, and how to align VAT cancellation with other UAE compliance requirements. A rushed or incorrect application can cost more than staying registered.

If you want clarity, accuracy, and peace of mind, let experts handle the process.

Book a free VAT consultation today
Chat with our VAT experts on WhatsApp:+971529757543