As the UAE’s tax landscape evolves in 2026, maintaining a clean record with the Federal Tax Authority (FTA) is a primary pillar of corporate governance. Whether you are a startup scaling up or a business restructuring its operations, understanding the lifecycle of your Tax Registration Number (TRN) is essential.
Value Added Tax (VAT) is an indirect tax that requires businesses to act as collectors on behalf of the government. This guide outlines the critical thresholds, deadlines, and procedural steps for both entering and exiting the UAE VAT system.
Navigating VAT Registration: Mandatory vs. Voluntary
The requirement to register for VAT in the UAE is dictated by your taxable turnover, which includes standard-rated supplies (5%), zero-rated supplies (0%), and imported goods or services. Unlike other taxes, VAT registration is not based on profit, but on the total value of your taxable transactions.
Mandatory Registration Threshold
A business is legally obligated to register for VAT if its taxable supplies and imports exceeded AED 375,000 over the previous 12 months. Alternatively, if a business anticipates that its taxable turnover will exceed this threshold in the next 30 days, it must initiate the registration process. It is vital to monitor your trailing 12-month revenue monthly; failing to register within 30 days of hitting this limit results in a significant administrative penalty of AED 10,000.
Voluntary Registration Benefits
For startups and small businesses, the UAE offers a voluntary registration window if taxable supplies or expenses exceed AED 187,500. While not legally required, many choose to register voluntarily to gain the ability to reclaim “Input VAT” paid on business startup costs, such as office rent, equipment, and professional services. This status also enhances business credibility when dealing with larger, VAT-registered corporate clients.
The Deregistration Process: Closing Your Tax Account
VAT deregistration is the formal process of canceling your TRN and suspending your tax obligations. It is a mandatory requirement in several scenarios, and missing the application window can lead to compounding fines.
When is Deregistration Mandatory?
You must apply for deregistration if your business stops making taxable supplies and does not intend to make any in the next 12 months. Additionally, if your business is being liquidated, closed, or if your taxable turnover has fallen below the voluntary threshold of AED 187,500 for the past 12 months, you are required to exit the system.
The Strict 20-Day Rule
Once a business meets the criteria for deregistration—for example, the date a trade license is canceled or the date taxable activity ceases—it has exactly 20 business days to submit the application via the EmaraTax portal. Delaying this application triggers a penalty of AED 1,000 for the first month, increasing by another AED 1,000 for each subsequent month of delay, capped at AED 10,000.
The Final VAT Return and Deemed Supplies
The Tax deregistration process is not considered complete until the FTA approves the application and the business files its “Final VAT Return.” This return is unique because it must account for “Deemed Supplies.” This means the business must pay output VAT on any remaining stock or assets (like computers, furniture, or inventory) on which input tax was previously claimed, even if those items haven’t been sold yet.
Post-Deregistration Obligations
Approval of your deregistration request does not mean your records can be discarded. Under UAE law, all businesses—including those that have deregistered—must maintain their VAT records, invoices, and accounting books for a minimum of 5 years. The FTA retains the right to audit these records even after the TRN has been deactivated.
Furthermore, as soon as your effective deregistration date is set, you must immediately stop charging VAT on your invoices. Continuing to collect VAT from customers after your registration has been canceled is a serious violation that can lead to criminal prosecution and heavy financial penalties.
Leave a Reply