What is VAT Deregistration?
A cancellation of a company of being a value-added tax (VAT)-registered entity means that the later ceases to exist or there are no longer required to be registered for VAT.
This can mean that the Tax Registration Number will be deregistered as well because they have stopped trading taxable goods and services.
Conditions that Should Be Met to Apply for Deregistration of the VAT
There are a couple of things that an entity should be qualified for before deciding to have their firm’s name be deregistered for VAT. The following below outlines the requirements:
- An entity is no longer handling any taxable goods or services.
- An entity does not meet the threshold of AED 375,000 anymore for the value of taxable goods and services.
In the event that an entity that wishes to deregister themselves from VAT meets the above qualifications, an application must be given by any entity meeting the above qualifications within 20 business days that those cases take place.
When the Federal Tax Authority (FTA) approved the request of an entity for VAT deregistration, it will be valid of the tax period’s last day in the time that the said company has qualified for those cases above.
However, they must first pay any taxes, returns, and administrative penalties that are unresolved before deregistration will be finalized.
Entities that are considered to be a tax group can apply for deregistration as long as they do not meet the requirements of being a tax group anymore. This can be as follows: the companies that started to be a tax group are not linked financially anymore or if the FTA itself has reasons to believe that it can cause tax evasion if a tax group status continues.
Types of VAT Deregistration
There are two types of VAT deregistration that an entity can fall into, and they are as follows:
Voluntary VAT Deregistration
The reason for a voluntary VAT deregistration is when an entity has taxable goods or services that fall from AED 375,000, if they no longer trade any taxable goods or supplies, or if they close down.
FTA can simply approve an entity’s request for VAT deregistration if they believe that the reason behind it is satisfactory. Since they are the ones that will verify the reason behind the deregistration, it is their call if they shall approve it or not.
Mandatory VAT Deregistration
On the other hand, a mandatory VAT deregistration applies when the FTA cancels the TRN of an entity. The reason can be because the FTA has verified the said entity to not have any trading of taxable goods or services or does not have the plan to trade those either. The FTA will take it upon themselves to deregister the TRN of the said entity since the latter does not voluntarily do so. A company, therefore, needs to know for sure that they meet the necessary requirements before making any rash decisions to deregister their TRN. For more information about VAT Deregistration visit here: