We see the same situation regularly. A business closes, the licence is cancelled, and a year later the owner discovers thousands of dirhams in penalties on a company that stopped trading long ago. The reason is simple: licence cancellation and tax de-registration are separate processes, and only you can start the second one.
Two deadlines, two authorities
- Corporate tax de-registration: apply within 3 months of the business ceasing, being dissolved or liquidated
- VAT de-registration: apply within 20 business days of becoming eligible, for example when you stop making taxable supplies
What has to happen first
The FTA will not approve de-registration while anything is outstanding. That means all returns must be filed, including a final return up to the date the business stopped, and all tax and penalties must be paid. Your final VAT return may also need to account for VAT on stock and business assets you still hold.
What late applications cost
Late de-registration carries AED 1,000, then a further AED 1,000 for each month of delay, up to a maximum of AED 10,000, and that applies separately to corporate tax and to VAT. Meanwhile, returns keep falling due, so the late filing penalties run alongside.
The order that works
- Fix the date the business actually stopped trading, since both deadlines run from it
- File all outstanding returns, then the final return
- Clear any tax and penalties on the account
- Apply for VAT de-registration, then corporate tax de-registration, with the closure documents
- Keep the approval confirmations: they are your proof the file is closed
Questions we are asked about this
My licence expired and I did not renew it. Is that the same as closing?
No. An expired licence does not end your tax obligations. You still need to apply for de-registration and settle the account.
Can I deregister if I still owe tax?
No. Outstanding returns and balances must be cleared before the FTA approves de-registration.
How long does the FTA take?
It depends on the case and how complete the application is. Start early rather than waiting until the last week of the deadline.
Need help with this? VATAXSYS, VAT and Tax Consultant, handles corporate tax de-registration for businesses across the UAE. Call +971 55 240 3135 or message us on WhatsApp for a free consultation.