Vat deregistration is the process for a registered taxable person to cancel the VAT registration. The main purpose is to deactivation the registration and removal of the VAT number of registrants. Tax deregistration can be applied by a person registered under VAT or done by Federal Tax Authority on finding that a person meets the condition for deregistration. The VAT Law provides registered taxable persons with the facility to cancel their VAT registration. Let us understand the circumstances in which a person can de-register under VAT and the process to be followed.
A person registered under VAT can apply for Tax De-registration in the following cases:
• The person stops making taxable supplies and does not expect to make any taxable supplies over a particular period
• The person’s taxable supplies or taxable expenses incurred over a period is less than the threshold limit as mentioned in Federal tax authority guidelines
Types of VAT DEREGISTRATION
Voluntary deregistration: Tax authorities approve deregistration if the tax authorities are satisfied with the conditions of vat cancellation. The valid reason shown should be verified by the authorities for the voluntary deregistration of VAT.
Mandatory deregistration: when the tax authorities themselves cancel the tax registration if they are satisfied with the conditions of cancellation of VAT. If the tax authorities verify that the firm is neither making any profits or does not intend to make any profit in the future, it mandatorily deregisters the person.
Process for vat deregistration:
The common process for deregistration under vat is mentioned below:
Apply for deregistration: The registrant should apply for tax deregistration within the particular period if the above-mentioned conditions for de-registrations are duly met.
Submitting of documents: submitting documents to evidence the eligibility to deregister
Payment terms: Registrant should ensure that any vat or administrative penalties a due are paid and vat returns are filed. Only upon meeting these conditions will enable VAT deregistration.
Approval: Upon the approval of deregistration, the federal tax authority will cancel the tax registration of with effect from the last day of tax period during which the event of deregistration application occurred or from a date decided by the federal tax authority. Registration receives a successful notification of de-registration after the approval of the deregistration application.
The decision of approval by federal tax authority depends on the provided reason as well as the clearance of all:
• Returns being filed.
• Any Administrative Penalties have been paid in full.
Vat deregistration for companies
The process of deregistration for companies is the same as of individuals. The difference is the criteria to apply for deregistration
The scenarios that require deregistration of tax group are
• The business registered as a tax group no longer meet the requirement as a tax group
• The persons under the tax group are no more financially associated with the group.
• FTA can cancel the registration if the tax group is involved in tax evasion or non-compliance.
Penalty for deregistration: Any taxable persons/companies must apply for deregistration if they fulfill any of the conditions laid down in the Decree Law and Executive Regulations and failure to apply within the timeframe specified will attract an administrative penalty as per Federal tax authorities’ guidelines. If there are any occurrences to pay penalty then you may seek the guidance of a tax expert for further procedures.
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