VAT registration is required for businesses that meet a specific revenue threshold, and businesses operating below this threshold must apply for VAT deregistration to avert incurring penalties for noncompliance. This article details the key differences between VAT registration and VAT deregistration, explaining the procedures and compliance requirements.
Definition of VAT Registration
VAT registration refers to the process of obtaining a Tax Registration Number (TRN) from the Federal Tax Authority (FTA). This registration enables businesses to charge, account for, and remit VAT on taxable supplies of goods and services.
Who is Required to Register for VAT?
The UAE VAT registration is classified into two categories:
Mandatory VAT Registration
Companies are required to register for VAT if their taxable turnover is higher than AED 375,000 annually. The threshold includes:
- Mainland and Free Zone ventures
- Exporters and importers
- E-commerce and service businesses
Voluntary VAT Registration
Businesses are eligible for voluntary registration if their taxable turnover is AED 187,500 to AED 375,000. Voluntary registration is appropriate for businesses that desire:
- To recover input VAT on procurements
- Customer credibility
- Preparation for future business expansion
Offshore & Free Zone Business VAT Registration
- There are specific Free Zone businesses that can be taxed with special VAT terms, and there are zero-rated transactions.
- Offshore companies do not have a VAT registration unless they possess a taxable presence in the UAE.
VAT Registration Benefits for Businesses
- Be UAE tax law compliant
- Reclaim VAT on business expenses
- Avoid penalty for not being registered
- Enhance credibility when trading with VAT-registered suppliers and customers
Definition of VAT Deregistration
VAT deregistration is the cancellation of a VAT registration when a company is no longer eligible for VAT or stops making taxable supplies. Once approved by the FTA, the business no longer has to charge or pay VAT.
Why Do Companies Submit VAT Deregistration?
Companies must submit a VAT deregistration if:
- They go out of business, liquidate, or wind up
- Their taxable turnover is below AED 187,500
- Their taxable supplies stop
Penalties for Non-Filing for VAT Deregistration
- Businesses that fail to deregister on time can still be liable for VAT returns
- AED 1,000 a month (max AED 10,000) penalties could be charged
- Future applications for tax relief could be refused by the FTA due to non-compliance
Key Differences Between VAT Registration and VAT Deregistration
| Features | VAT Registration | VAT Deregistration |
| Definition | Procedure for obtaining a VAT Registration Number (TRN) from the FTA. | Procedure for cancelling VAT registration with the FTA. |
| Requirement | For companies with over AED 375,000 annual turnover. | When business has ceased to be taxable or has below VAT thresholds. |
| Threshold | AED 375,000 (mandatory). | AED 187,500 (optional), below AED 187,500 or no taxable transaction. |
| Processing Time | Up to 20 business days (depending on approval) | Up to 30 business days (subject to tax clearance) |
| FTA Approval | Verification of business and financial information. | Tax clearance and submission of terminal VAT returns |
| Penalties | AED 10,000 for delay in deregistration. | AED 1,000 per month (max. AED 10,000) for deregistration delay |
Step-by-Step Guide to VAT Registration in the UAE
Step 1: Open an Account on the FTA Portal
- Begin by going to the FTA Emaratax Portal.
- Sign up and activate your email address to activate your account.
Step 2: Complete the VAT Registration Form
- After activating your account, log in and fill out the application form.
- Be sure to fill in:
- Your trade license and business name information.
- Financial turnover data.
- Either for mandatory or voluntary VAT registration.
Step 3: Upload & Submit Documents Required
- You will have to upload clear photocopies of good quality of the following:
- Trade License
- Passport & Emirates ID (for all partners/business owners)
- Financial Proof of Turnover (e.g., financial statements, contracts, invoices)
- Bank Account Details
Step 4: Apply & Check Its Status
After submitting the application, the FTA will review it. If needed, they may request additional documents for verification. Processing usually takes up to 20 business days.
Step 5: Receive Your VAT Registration Certificate
If your application is approved, you’ll be issued a Tax Registration Number (TRN). From this point forward, your business must:
- Charge VAT on taxable goods and services.
- Submit VAT returns every quarter.
Step-by-Step Process for VAT Deregistration in UAE
Step 1: Log in to the FTA Portal
Go to the FTA Portal
Go to VAT Deregistration
Step 2: File a Deregistration Request
Quote valid reasons for deregistration
Attach supporting documents, e.g., business closure proof
Step 3: Clear Outstanding VAT Returns & Liabilities
Pay all outstanding VAT liabilities
Submit final VAT return before closure
Step 4: Wait for FTA Approval
The FTA will review the request and can conduct an audit
The process may take up to 30 working days
Step 5: Get VAT Deregistration Confirmation
Upon approval, the business is no longer required to file VAT returns.
Common Mistakes to Avoid in VAT Registration & Deregistration
- Late VAT registration with an AED 10,000 penalty
- Submitting inaccurate records while registering for VAT
- Not deregistering in time, with AED 1,000 monthly penalty
- Failure to maintain VAT records before filing for deregistration
Need Expert Assistance for VAT Registration or Deregistration?
Premier Tax Consultants in UAE such as Farahat & Co. are committed to assisting businesses to meet tax compliance. Farahat & Co. can assist can assist with the following VAT services:
- Register for VAT seamlessly and as per FTA standards
- File VAT returns accurately and avoid penalties
- Complete VAT deregistration timely in compliance with the UAE laws
Contact Farahat & Co. today for expert VAT registration, VAT deregistration, and compliance services in the UAE and we shall be glad to assist you.
FAQ
Q – What is the main difference between VAT registration and VAT deregistration in the UAE?
A –VAT registration is when a Tax Registration Number (TRN) issued by the Federal Tax Authority (FTA) is obtained, which allows a business to charge, collect, and pay VAT.
- VAT deregistration is when VAT registration is cancelled when a business drops below the threshold for VAT registration or stops taxable activities
Q – When is VAT registration mandatory for UAE businesses?
A – VAT registration is mandatory if a business has a taxable turnover of over AED 375,000 per annum. Businesses with turnover between AED 187,500 and AED 375,000 may register voluntarily
Q – When to request VAT deregistration?
A – A business must request VAT deregistration if:
- Its taxable turnover falls below AED 187,500
- It ceases business operations or goes into liquidation
- It no longer makes taxable supplies
Deliberate late filing for deregistration will result in an AED 1,000 monthly penalty (capping at AED 10,000)
Q – What if a business, which is registered for VAT, does not deregister once it closes down?
A – If the company suspends its taxable operations without deregistering, it will still have to:
- File VAT returns
- Remit penalties on late filing of VAT
- Retain tax books for five years
To avoid unnecessary tax imposition, businesses ought to deregister as soon as they cease to be VAT-eligible
Q – Can a company re-register for VAT following deregistration?
A – Yes, re-registration for VAT can be applied for if taxable turnover once again exceeds AED 375,000 or the business resumes taxable activities. The business must follow the standard VAT registration process through the FTA portal
