Does Closing a Company in UAE Require VAT Deregistration?

When a company’s business is liquidated, complete control of the property is transferred to the appointed liquidator, and the company is required to close in accordance with the applicable liquidation procedure. Upon completion of closure, the company should also be removed from the VAT registration list, a separate step from the commercial liquidation process itself.

This process can take real time, since the UAE requires several distinct steps as part of company cancellation, including closing company accounts, finalizing account statements and invoices, preparing a final financial statement, and closing telecommunications services.

Farahat & Co. supports clients through all stages of liquidation, as an established tax consultancy specializing in VAT registration and deregistration for companies closing in the UAE, employing certified tax advisors and registered tax agents.

Also check: VAT Deregistration Services in UAE

The Necessity of Informing Government Agencies About the Company’s Closure

Upon closing the business and ceasing activity, the commercial license must be officially cancelled to avoid fines and violations accumulating on the license due to:

• License expiration
• Non-renewal
• Failure to formally cancel the license
• Failure to notify the Federal Tax Authority of VAT registration cancellation

Where the service applicant is a partner in a joint-stock company, they need to be formally released from any financial obligations toward creditors and partners, while also having their interests and rights in the company protected as its activity is dissolved.

The main consequences of company liquidation include the owner being unable to serve as a partner in another UAE company, and limitations on their ability to continue certain business activities, until the relevant obligations are settled.

Does Closing Down a Company in the UAE Require VAT Deregistration?

Yes. Cancelling VAT registration is a separate process from liquidating the company itself. A registrant’s tax registration is only cancelled once:

• The registrant stops making taxable supplies
• All tax due and administrative fines owed have been paid
• All required VAT returns for the periods the registrant was registered have been submitted, as stipulated under VAT legislation
• A cancellation request is submitted within 20 business days of meeting the cancellation conditions
• The value of supplies over the trailing 12 months was below the voluntary registration threshold of AED 187,500

The UAE tax system relies on voluntary self-compliance by taxable persons in registering, submitting returns, paying due tax, and cancelling registration when the conditions are met.

Must check: VAT Consultants in UAE

Worked Example: VAT Deregistration Timeline During Company Closure

A company completes its final taxable supply on 1 March and settles all outstanding VAT and administrative fines by 15 March. It submits every required VAT return for its registered periods by 20 March, satisfying the substantive conditions for deregistration. Under the 20-business-day submission window, the company needs to file its formal deregistration request by roughly mid-April. Filing this request promptly, rather than treating it as an afterthought once the commercial liquidation is already complete, avoids the company remaining technically VAT-registered, and exposed to ongoing filing obligations, well after it has genuinely stopped trading.

Official Closure of a Company in the UAE

Many types of companies can be closed in the UAE, including:

• Joint liability companies
• Limited liability companies
• Simple limited partnerships
• Public joint stock companies
• Private joint stock companies (PJSC)

A significant part of the company closure process concerns properly compensating employees. Company owners must cancel employee visas and work permits, coordinating with the General Directorate of Residency and Foreigners Affairs and the Ministry of Human Resources and Emiratisation as required.

Employee notice periods before contract termination are governed by UAE Labour Law, Federal Decree-Law No. 33 of 2021, and the specific terms of each employment contract, commonly a minimum of 30 days, though contracts can specify a longer period. Employers should confirm the specific notice obligation under each employee’s actual contract rather than assuming a single fixed period applies universally.

In many cases, employees can retain their residency visas until the company’s business license actually expires.

Other Services Accompanying Company Liquidation

Farahat & Co. provides VAT registration and deregistration services, tax declaration services, and VAT recovery services, along with:

• Tax declaration
• Amending VAT registration details
• Registering a VAT group
• Cancellation of VAT registration
• Cancelling a VAT group
• Determining and modifying the VAT tax period
• Submitting VAT returns and claiming input tax refunds

Farahat & Co. employs experienced VAT specialists capable of representing clients with the FTA and defending their interests before the Tax Disputes Resolution Committee. They also attend tax audit sessions the FTA may impose on companies, prepare defense documentation, and appeal FTA decisions where a ruling against a company appears unfair.

Farahat & Co. provides auditing services related to a company’s transactions with the FTA and certified tax agent services across Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah, Fujairah, and the rest of the UAE.

Frequently Asked Questions (FAQs)

How Farahat & Co. Can Help

Farahat & Co., a trusted Tax Firm in UAE, supports businesses through company liquidation, VAT deregistration, and FTA representation during the closure process.

Contact Farahat & Co. today to discuss your company closure and VAT deregistration requirements.