The VAT UAE Laws provide registered taxpayers (including voluntary registrants) and companies with provisions for VAT deregistration too. An entity can apply for deregistration if the annual turnover did not exceed Dh187,500 ($51,000) 13 months after registering with the FTA.
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The VAT UAE Deregistration Criteria
Under the VAT Decree Law and Executive Regulations, VAT Registered Taxpayers and companies must fulfill the below criteria to put into motion the VAT Deregistration:
- Total Taxable Supplies within 12 months from the date of VAT registration do not exceed Dh187,500.
- Anticipated taxable supplies for the succeeding 30 Day period starting from the end of tax year will also not make cumulative taxable supplies or expense cross the Dh187,500 threshold.
If the above two criteria hold true for a particular entity, taxpayer or company, it can apply for deregistration.
Note: Failure to do will attract an administrative VAT deregistration penalty of Dh10,000.
The Tax Year in UAE
Tax Year varies with respect to the date of application for Tax Registration. To cite an example, if the applicant applied for voluntary registration on May 1, 2018, his/her tax year will end on April 1, 2019.
In the above case if the registrant has not made supplies equal to Dh187,500 for the tax year. And has also assessed his supplies and expenses for the next thirty days (ending on May 30) to be confirmed that the, an application for deregistration can be made before June 20.
Reportedly, more than a few thousand companies in UAE will file for deregistration owing to liquidation or any of the above-mentioned criteria. Accordingly, a number of companies will apply for registrations as they meet the registration criteria for the first time this year.
VAT Deregistration Disadvantages
One of the primary disadvantages would be the inability of businesses to make VAT input claims on supplies made by them. This will make their supply dearer by a considerable fraction which may force VAT-registered customers to look for other alternative suppliers.
Moreover, non-registered businesses would be required to pay VAT against inventory and assets procured while they were registered under VAT. This would be applicable irrespective of any VAT Claims on them.
All such supplies would be treated as deemed-supplies or self-supply of assets from date of deregistration. Hence, Businesses need to be careful while applying for deregistration.
However, there are a few underlying benefits of deregistration too. The primary among this is that they can make supplies to unregistered individuals and businesses at cheaper rates than their registered counterparts.
Also, businesses would not have to pay VAT Compliance Fees. However, experts say that the nominal threshold limit will mean that very few businesses will be eligible for deregistration.