UAE VAT Deregistration Guide: When and How to Deregister

Not every business needs to stay VAT registered forever. If your revenue drops, you close down, or you sell the business, you can deregister from UAE VAT.

But the process is not automatic. You need to apply to the Federal Tax Authority, clear your final tax returns, and avoid penalties. Mess this up and the FTA can fine you up to AED 10,000.

If you are just getting started with VAT, read our full VAT registration guide first. Then come back here to understand when you can leave the system.

Here is what you need to know about VAT deregistration in the UAE.

When Can You Deregister from UAE VAT?

The FTA allows VAT deregistration in three specific situations.

1. Your Revenue Dropped Below the Voluntary Threshold

If your taxable supplies and imports over the past 12 months are below AED 187,500, and you expect them to stay below that level for the next 30 days, you have the right to deregister.

This is the voluntary registration threshold. You registered voluntarily when your revenue crossed AED 187,500, and now it has fallen back below that line. You are free to leave.

Important caveat. If you expect your revenue to cross AED 187,500 again in the near future, it is usually better to stay registered. Deregistering and re-registering creates extra paperwork and gives the FTA more chances to scrutinise your returns.

2. Your Business Has Closed

If you have ceased all business activities and have no intention of reopening, you must deregister. This applies whether you closed permanently or sold the business to someone else.

The FTA expects you to submit a deregistration application within 20 business days of the closure date.

3. You Sold Your Business

If the business was sold or transferred to a new owner, the original VAT registration does not carry over. The previous owner must deregister, and the new owner must register separately.

There is an exception called a business transfer relief where the new owner can take over the existing registration under certain conditions. This requires both parties to agree and the FTA to approve. Speak to your tax advisor before assuming this applies.

When You Cannot Deregister

There are two common situations where the FTA will reject your deregistration request.

Your revenue is above the mandatory threshold. If your taxable supplies exceed AED 375,000, you must stay registered. No exceptions. If you try to deregister while above this figure, your application will be denied.

You do not have a valid reason. The FTA requires a reason for deregistration. “I just want to stop paying VAT” is not a valid reason when your revenue is above AED 187,500.

How to Deregister from VAT in the UAE

The entire process happens online through the FTA e-Services portal. You do not need to visit a physical office.

Step 1: Check Your Eligibility

Review your taxable supplies for the past 12 months. If they are below AED 187,500 and you expect them to remain below that level, you qualify.

If you have closed your business or sold it, gather your closure or transfer documentation.

Step 2: Submit the Deregistration Application

Log into the FTA e-Services portal using your username and password.

Go to VAT > Deregistration and fill in Form VATNR1. You will need to provide:

• Your Tax Registration Number (TRN)
• The reason for deregistration
• The effective date of deregistration
• A declaration of your final taxable supplies

Step 3: File Your Final VAT Return

After submission, you must file a final VAT return. This covers the period from your last filed return up to the deregistration date.

Include any VAT you owe on:

• Outstanding invoices
• Deemed supplies (goods you kept after deregistration)
• Capital assets purchased while registered (more on this below)

Step 4: Pay Any Outstanding Tax

The FTA will not approve your deregistration if you have unpaid VAT or penalties. Settle everything before applying to avoid delays.

Step 5: Wait for FTA Approval

The FTA typically processes deregistration applications within 20 business days. You will receive notification by email once approved.

Deemed Supplies and Capital Goods After Deregistration

This is the part most people miss.

Deemed Supplies

When you deregister, the FTA treats certain goods in your possession as if you sold them. This is called a “deemed supply” and VAT applies.

The rules are:

• Goods on hand at deregistration: VAT is due on these goods if they were purchased while you were registered and you had claimed input tax on them
• Exceptions: You do not owe VAT on goods where the total tax payable is below AED 2,000, or on goods already consumed or sold

Capital Goods

If you bought capital assets (equipment, machinery, vehicles) while registered and claimed input tax on them, you may need to repay a portion of that input tax when you deregister.

The repayment depends on the capital goods scheme. Assets are categorised by price band:

• Property or buildings (value AED 10 million or more): 10-year adjustment period
• Other capital goods (value AED 50,000 or more): 5-year adjustment period

For each full year remaining in the adjustment period after deregistration, you must repay a fraction of the original input tax.

Example: You bought machinery for AED 200,000 and claimed AED 10,000 in input tax. You deregistered after 2 years of the 5-year adjustment period. You owe AED 6,000 (3 remaining years divided by 5, multiplied by AED 10,000).

VAT Deregistration Penalties in the UAE

The FTA does not let you walk away without filing. Here are the penalties that apply.

The most important deadline: submit your deregistration application within 20 business days of becoming eligible (revenue drop, closure, or sale).

What Happens After Deregistration

Once the FTA approves your deregistration:

• Your TRN becomes inactive
• You stop charging VAT on your invoices
• You can no longer claim input tax on purchases
• You must remove VAT from your pricing
• You no longer need to file VAT returns

Keep all your VAT records for at least 5 years after deregistration. The FTA can still audit you during this period even if you are no longer registered.

Should You Stay Registered Voluntarily?

Deregistering feels like a simplification. But there are situations where staying registered voluntarily makes sense.

• Your customers are VAT-registered businesses. They can reclaim the VAT you charge, so it does not affect them. But if you deregister, you lose the ability to reclaim input tax on your own purchases. This can cost you more than you save.
• You expect revenue to recover soon. If your drop in revenue is temporary due to seasonal fluctuations or a delayed project, deregistering and then re-registering creates more administrative work than just staying put.
• You have significant input tax credits. If your business model means you regularly reclaim more VAT than you charge, staying registered is financially beneficial even with lower revenue.

Run the numbers before you file for deregistration. It is not always the simple choice it appears to be.

Key Takeaways

• You can deregister if taxable supplies fall below AED 187,500 over 12 months, or if your business closes or is sold
• Apply through the FTA e-Services portal using Form VATNR1
• File a final VAT return and pay any outstanding tax before approval
• Account for deemed supplies and capital goods adjustments
• Submit within 20 business days of becoming eligible, or face AED 10,000 in penalties
• Keep records for 5 years after deregistration

FAQs About UAE VAT Deregistration

Can I deregister if my revenue dropped temporarily?

If your revenue dips below AED 187,500 but you expect it to recover, it is usually better to stay registered. Deregistering and re-registering creates additional administrative work and triggers more FTA scrutiny.

What happens to my TRN after deregistration?

Your Tax Registration Number becomes inactive. You cannot reuse it if you register again. A new TRN will be issued if you re-register in the future.

How long does VAT deregistration take in the UAE?

The FTA typically processes applications within 20 business days. Complex cases involving capital goods adjustments or business transfers may take longer.

Do I still need to file VAT returns after deregistration?

You must file one final VAT return covering the period up to your deregistration date. After that, no further returns are required.