In the UAE, businesses that register for Value Added Tax are expected to charge VAT on goods and services and submit returns on time. But not every company stays in that position forever. When your business stops meeting the requirements to remain VAT registered, it’s time to step back and review. There are clear cases where VAT deregistration required, and knowing when to act helps you avoid penalties and stay on the right side of compliance.
In this guide, we’ll cover everything business owners in Dubai need to know about when VAT deregistration is required, the types of deregistration, conditions set by the Federal Tax Authority (FTA), and the consequences of failing to deregister on time.
What Is VAT Deregistration?
VAT deregistration is the formal process of canceling your VAT registration with the UAE’s Federal Tax Authority (FTA). Once deregistered, your business is no longer required to charge VAT, file returns, or comply with VAT-related obligations.
However, VAT deregistration is not automatic. You must apply through the FTA portal and meet specific conditions.
When Is VAT Deregistration Required in Dubai?
There are two main situations in which VAT deregistration is required:
Mandatory VAT Deregistration
You must apply for VAT deregistration within 20 business days if your business meets either of these two conditions:
Business Ceases Making Taxable Supplies
If your business permanently stops trading or is no longer making any taxable supplies, you are legally required to apply for deregistration.
Example:
A company closes down or is liquidated and no longer provides goods or services.
Turnover Falls Below AED 187,500 (Voluntary Threshold)
If your business was voluntarily registered (below the AED 375,000 mandatory threshold) and your taxable turnover over the past 12 months has fallen below AED 187,500, you are required to deregister.
Failure to apply within 20 business days can lead to an FTA penalty of AED 10,000.
Voluntary VAT Deregistration
You may choose to deregister if:
- Your taxable turnover over the past 12 months falls below AED 375,000 (mandatory threshold), but remains above AED 187,500.
- You expect your taxable turnover in the next 30 days to remain below AED 375,000.
- You no longer need the VAT registration for operational reasons.
Note: Even in voluntary cases, FTA must approve the application based on your recent VAT returns and business activities.
Common Scenarios That Require VAT Deregistration
Here are some real life situations where a business in Dubai may need to apply for VAT deregistration:
If a company shuts down due to liquidation: This requires mandatory VAT deregistration. The business must submit the application within 20 days.
If the business hasn’t generated any revenue for 12 months: This may qualify for mandatory deregistration if it no longer meets VAT registration requirements. The application must be submitted within 20 days.
If the business relocates outside the UAE and no longer makes taxable supplies in the UAE: Mandatory VAT deregistration is required.
If the business turnover drops below AED 375,000: This qualifies for voluntary deregistration. The business may apply but is not required to do so.
If the business suspends operations temporarily (short-term pause): VAT deregistration is not required in this case. The VAT registration remains active unless the closure becomes permanent.
Documents Required for VAT Deregistration in UAE
To apply for VAT deregistration, you’ll need:
- Emirates ID and passport copy of the business owner
- Trade license (valid or expired)
- VAT certificate
- Last VAT return filed
- Bank account closure letter (if applicable)
- Liquidation certificate (if business is closing)
- Final audit report (may be required by FTA)
- MOHRE/GDRFA clearance (if company is closing)
Consequences of Not Deregistering VAT on Time
Failing to deregister on time has serious consequences:
- Fixed Penalty of AED 10,000 by the FTA
- Ongoing VAT filing obligation even if no activity
- Accumulated fines for late returns or non-filing
- Rejection of future business licenses or clearances
FTA considers non compliance a tax violation, which can also affect your company’s immigration and legal status in the UAE.
Timeline for VAT Deregistration
- Application Deadline: Within 20 business days from when you’re no longer eligible
- FTA Review Period: Usually 20 to 40 business days
- FTA May Request: Final returns, audit reports, supporting documents
- Effective Deregistration Date: As specified by FTA upon approval
Tips for Smooth VAT Deregistration
- File all pending VAT returns and settle any outstanding fines before applying
- Ensure your accounting records are up to date
- Attach a valid reason and supporting documents during the application
- Hire a tax agent or professional if liquidation is involved
- Do not ignore FTA follow up emails or document requests
How to Apply for VAT Deregistration (Step-by-Step)
Log in to FTA’s e-Services portal
Go to VAT De-registration
Select the reason for de-registration
Upload all necessary documents
Submit the application and wait for FTA review
Monitor FTA dashboard for updates or requests
Once approved, download the VAT Deregistration Certificate
Frequently Asked Questions (FAQs)
Yes, if your business is shutting down or no longer making taxable supplies, you must apply for VAT deregistration within 20 business days.
The Federal Tax Authority (FTA) imposes a fixed penalty of AED 10,000 for late VAT deregistration applications.
Yes. If your taxable turnover falls below AED 375,000 but remains above AED 187,500, you may apply for voluntary deregistration. The FTA will review and decide based on your circumstances.
Yes. You are required to continue filing VAT returns until the FTA approves your deregistration and issues the deregistration certificate.
No. If your business is expected to resume taxable activities, you should keep your VAT registration active. Deregistration is only for businesses that have permanently stopped taxable activities.
Conclusion
VAT deregistration in Dubai is a mandatory legal step when your business no longer qualifies to stay VAT registered. Whether your company is shutting down, relocating, or experiencing a drop in turnover, knowing when and how to deregister can save you from unnecessary fines and complications. Failing to apply on time not only results in penalties but may also create future obstacles for business operations or immigration status in the UAE.
