When Can I Deregister From VAT?

When deregistration is mandatory, optional, or not allowed

The two rows to watch are the third and the sixth. Falling below the voluntary threshold makes deregistration mandatory, not optional, and a temporary dip you expect to reverse may not be worth deregistering over, given the cost of coming back.

The full position

Deregistration has two triggers, and the distinction between them decides whether you have a choice.

Mandatory deregistration is required when you stop making taxable supplies altogether (because you have ceased trading, closed the business, or changed what you do) or when your taxable supplies over the previous twelve months fall below the voluntary registration threshold of AED 187,500 of taxable supplies, imports or taxable expenses. In these cases you do not get to decide; you must apply to deregister within the window set by the rules, and missing that window carries a penalty.

Voluntary deregistration is available when your taxable supplies fall below the mandatory threshold of AED 375,000 of taxable supplies and imports over the previous 12 months, or expected within the next 30 days but remain above the voluntary one. Here you have a genuine choice: you can stay registered, which may suit you if your customers are VAT-registered businesses and you value recovering input tax, or you can deregister to shed the compliance burden.

What you cannot do is deregister while you still exceed the mandatory threshold. Registration follows taxable supplies, and as long as they are above AED 375,000 of taxable supplies and imports over the previous 12 months, or expected within the next 30 days you remain within the mandatory net regardless of preference.

The application goes through EmaraTax, and it is not merely administrative: you must settle outstanding returns and liabilities, and account for VAT on business assets you still hold, before the FTA approves it.

The deadline and the penalty

The point businesses most often miss is that mandatory deregistration has a clock, just as registration does. Once the trigger occurs (you stop making taxable supplies, or drop below the voluntary threshold) you have a limited period to apply, and applying late attracts a fixed penalty in the same way late registration does.

This catches businesses that wind down gradually. A company whose revenue tails off below AED 187,500 of taxable supplies, imports or taxable expenses may not notice it has crossed the deregistration trigger, because nothing prompts the thought. It is simply doing less. But the obligation to deregister arose when the twelve-month figure fell below the threshold, and the penalty accrues from the missed deadline, not from when someone eventually notices.

The discipline is the mirror of the registration one: just as you monitor a rolling twelve-month total to know when you must register, the same figure tells you when you must deregister. A business winding down should be watching that number as attentively as a business scaling up.

What you have to settle first

Deregistration is not a clean exit you can take at will, the FTA approves it only once your affairs are in order, which means several things have to be settled:

All outstanding VAT returns must be filed, up to and including a final return covering the period to the deregistration date. All VAT due must be paid; you cannot deregister to escape a liability. And, the part most often overlooked, you must account for VAT on business assets you still hold at deregistration on which you previously recovered input tax. The logic is that you recovered VAT on those assets on the basis that they were used in a taxable business; if that business is ending, the VAT is, in effect, clawed back on what remains.

That final point can produce an unexpected bill. A business deregistering while still holding equipment, stock or a commercial property on which it recovered input tax may owe VAT on the current value of those assets. It is not a reason to avoid deregistering when required. It is a reason to quantify it in advance so it is not a surprise.

Should you deregister when it is optional?

When deregistration is voluntary, supplies below AED 375,000 of taxable supplies and imports over the previous 12 months, or expected within the next 30 days but above AED 187,500 of taxable supplies, imports or taxable expenses. It is a genuine business decision, and the answer turns on the same logic as voluntary registration, in reverse.

Staying registered is usually worth it if your customers are VAT-registered businesses, because they recover the VAT you charge, so it costs them nothing, and you continue to recover input tax on your own costs. Deregistering is usually worth it if you sell to consumers, because your VAT is a real cost to them or a drag on your margin, and being able to drop it can make you more competitive or improve your bottom line.

The compliance burden weighs on the deregister side too: returns, record-keeping and, increasingly, e-invisibility obligations all fall away. But there are two cautions. Re-registering later, if your supplies climb back above the threshold, is a fresh process with its own timing. And a temporary dip you expect to reverse is rarely worth deregistering over, because you may simply have to come straight back. Deregister when the change is real, not when it is seasonal.

What trips people up

• Assuming deregistration is always optional, when falling below AED 187,500 of taxable supplies, imports or taxable expenses or ceasing supplies makes it mandatory.
• Missing the deregistration deadline, which carries a penalty just as late registration does.
• Not monitoring the rolling twelve-month figure while winding down, so the trigger passes unnoticed.
• Forgetting VAT on business assets held at deregistration, an unexpected final bill.
• Trying to deregister to avoid an outstanding liability, which the FTA will not approve.
• Deregistering over a temporary dip you expect to reverse, then having to re-register.
• Deregistering while still above AED 375,000 of taxable supplies and imports over the previous 12 months, or expected within the next 30 days, which is not permitted.

How to act on this

1. Check your rolling twelve-month taxable supplies against AED 375,000 of taxable supplies and imports over the previous 12 months, or expected within the next 30 days and AED 187,500 of taxable supplies, imports or taxable expenses.
2. Determine whether deregistration is mandatory or optional for your situation.
3. If mandatory, note the deadline and apply within the window to avoid the penalty.
4. Quantify VAT due on business assets you will still hold at deregistration.
5. File all outstanding returns and settle liabilities before applying through EmaraTax.

Related questions

Frequently Asked Questions

Last reviewed 27 July 2026. Rates, thresholds and deadlines change, the e-invoicing provider deadline has already moved once. Confirm current requirements with the Federal Tax Authority before acting, or ask us to check your position.