When does a company has to apply for UAE VAT de-registration if it is registered on a mandatorily basis?

As per VAT Decree Law, a tax registrant may apply for VAT de-registration if his Taxable Supplies1 during the past (12) months was less than the Mandatory Registration Threshold (please note Mandatory Registration Threshold limit is AED 375,000).

VAT Executive Regulations requires that a Tax Registrant must apply to the Authority for de-registration in accordance with certain cases mentioned in the VAT Decree-Law, within (20) business days of the occurrence of any of them. Below is text from VAT Decree-Law with reference to above,

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A Registrant shall apply to the Authority for Tax Deregistration in any of the following cases:

• 1.
• If he stops making Taxable Supplies1

• 2.
• If the value of the Taxable Supplies1 made over a period of (12) consecutive months is less than the Voluntary Registration Threshold2 and said tax Registrant does not meet the condition stipulated in Article 17(2) of Decree-Law which refers to fact that where the total value of taxable supplies or the expenses subject to tax in next 30 days will be lower than the Voluntary Threshold Limit.

Article 14 of VAT Executive Regulations further require as below,

The Authority shall accept a Registrant’s application for deregistration where the two following conditions are met:

• 1.
• The Registrant stops making supplies referred to in Article (19) of the Decree-Law3 and does not expect to make any such supplies over the next 12-month period;

• 2.
• The value of supplies referred to in Article (19) of the Decree-Law made, or taxable expenses incurred, by the Registrant over the previous 12-months is less than the Voluntary Registration Threshold and the Authority is satisfied that his supplies, according to the provisions of the Decree-Law, or taxable expenses, expected over the next 30 days, are not expected to exceed the Voluntary Registration Threshold.

1 Taxable Supply includes supply of Goods or Services for a Consideration by a Person conducting Business in the State, and does not include Exempt Supply.

2 Voluntary Registration Threshold limit is AED 187,500. It is defined as below,

An amount of AED 187.500; if exceeded by the value of Taxable Supplies or taxable expenses or is anticipated to be exceeded, the supplier may apply for Tax Registration.

Article (19) of the Decree-Law3 is as below,

To determine whether a Person has exceeded the Mandatory Registration Threshold and the Voluntary Registration Threshold, the following shall be calculated:

• 1.
• The value of Taxable Goods and Services.

• 2.
• The value of Concerned Goods (Goods that have been imported, and would not be exempt if supplied in the State) and Concerned Services (Services that have been imported, where the place of supply is in the State, and would not be exempt if supplied in the State) received by the Person unless covered by Clause (1) of this Article.

• 3.
• The value of the whole or relevant part of Taxable Supplies that belong to said Person if he has, wholly or partly, acquired a Business from another Person who made the supplies.

• 4.
• The value of Taxable Supplies made by Related Parties pursuant to the cases stated in the Executive Regulation of this Decree-Law.

Note: This refers to condition that in case turnover of related parties is segregated artificially that there is a Tax revenue loss due to segregation, the Authority may treat Taxable Supplies of each of the Persons as aggregated to determine whether the total of their taxable supplies exceeded the Mandatory Registration Threshold and Voluntary Registration Threshold.

Also in case Authority feels that even though revenue is not segregated artificially put there is loss of Tax revenue due to segregation, still the same can be aggregated.

Conclusion

So tax registrant shall apply for deregistration in following cases,

• ●
• A Taxable Person not making taxable supplies shall apply for deregistration within 20 business days.

• ●
• A Taxable Person with Taxable Supplies less than Voluntary Registration Limit of AED 187,500 in last 12 month and expected taxable supplies or expenses in next 30 days is less than of Voluntary Registration Limit of AED 187,500, MUST apply for de-registration.

On further study of Executive regulations, Article 14 states that Authority shall accept a de-registration application when Taxable person stop making taxable supplies and do not expect to make such supplies in next 12 months. Also when the Taxable Supplies or Expenses in last 12 months was less than Voluntary Registration Threshold and expected taxable supplies or expenses in next 30 days is less than of Voluntary Registration Limit of AED 187,500.

It is clear that a person making Taxable Supply or Expenses, less than Voluntary Registration in last 12 months, MUST apply for VAT de-registration.

But it needs more clarity from Authority that if a person making Taxable Expenses more than 187,500 in last 12 months but Taxable Supplies nil or less than this limit, is still required to make an application for de-registration. On further reading as to when does the Authority must accept the de-registration application, it contains text on having taxable Expenses of last 12 months as well so it seems intention is to include last 12 months taxable expenses as well but this area needs more clarity.

When does a company has apply for VAT de-registration if it is registered on a voluntarily basis?

Conditions mentioned in above article apply and additionally a person registered on a voluntarily basis may not apply for tax deregistration within 12 months of the date of registration.

Is there a penalty for not filing VAT de-registration application when required to do so?

As per administrative penalties prescribed by cabinet resolution, the failure of the Registrant to submit a de-registration application within the timeframe specified in the Tax Law will result in incurring penalty of AED 10,000.

DISCLAIMER:

This document is only for information purposes and should not be construed as an advice. It does not necessarily covers each aspect of the topic with which it deals. You should not act upon the contents of this document without receiving formal advice on your particular circumstances.

If you would like to discuss it further or have queries about VAT services in Dubai & UAE, please drop us an email at info@premier-brains.com or call us at +971 4 3542959.

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