When a company or business activity in the UAE comes to an end, the taxpayer is required to notify the Federal Tax Authority (FTA) and de-register for Corporate Tax (CT) within three months of that date.
Corporate Tax (CT) deregistration in the UAE is a critical process that allows businesses to cease their liability for paying corporate taxes. It is important to note that a company is still subject to CT paying and filing requirements while it is in the process of being wound up.
The FTA oversees and regulates the deregistration process to ensure compliance with the applicable laws and regulations. Businesses need to navigate this procedure carefully to avoid penalties and ensure seamless closure or restructuring.
Reasons for Corporate Tax Deregistration
Businesses may need to deregister from corporate tax for several reasons, including:
- Closure of business – companies that cease operations due to bankruptcy, insolvency, or strategic decisions to wind up must apply for deregistration.
- Change in legal structure – if a company undergoes a merger, acquisition, or conversion to a different entity type, deregistration is necessary.
- Transfer of ownership – when a company is sold or the ownership is transferred, the new owner assumes responsibility for tax registration, while the previous owner must deregister.
- Miscellaneous scenarios – a company that did not previously register for CT but is undergoing liquidation must register, file CT returns for all applicable periods, and then apply for deregistration to remain compliant.
When to file an application for Corporate Tax Deregistration
The timeline for submitting a CT deregistration application varies based on the type of entity:
- Natural persons (individuals) – must file the application within three months from the date of cessation of business or business activity.
- Legal persons (corporate entities) – must file the application within three months from the date the entity ceases to exist, such as in cases of dissolution, liquidation, or other reasons.
To be eligible for deregistration, a taxpayer must:
- File all required CT returns, including the return for the period up to the cessation of the business.
- Pay all taxes due.
- Settle all administrative penalties as mandated by law.
Penalties for late Corporate Tax Deregistration
Failure to comply with the stipulated timelines for CT deregistration can result in penalties, as follows:
- A penalty of AED1,000 applies for failing to apply for deregistration within three months of a cessation, dissolution, liquidation, or other termination event.
- An additional penalty of AED1,000 is charged monthly on the same date, up to a maximum of AED10,000. For example, if a company delays deregistration by two months, it may incur a penalty of AED2,000 in addition to the initial fine of AED1,000.
- The FTA reserves the right to deregister entities that violate tax deregistration requirements.
Understanding the process of Corporate Tax Deregistration
To deregister from Corporate Tax registration, taxpayers should apply via the EmaraTax portal, the online platform for tax-related services provided by the FTA.
To complete the application form, different documents are required depending on the reason for deregistration:
- Sale of business – documentary evidence proving the sale of the business
- Merger of business – documentary evidence proving the merger of the business
- Re-domiciliation of the business – documentary evidence proving the re-domiciliation of the business
- Cessation of business – documentary evidence proving the cessation of the business
Once the taxpayer has completed and submitted the online application form, the FTA may take up to 30 business days from that date to process the application. In cases where additional information is required, the FTA may take additional time. If an application is not resubmitted within 60 calendar days from the date the FTA requests additional information, the application may be rejected.
If an application to de-register is successful, the FTA will issue a tax clearance certificate.
Why Choose Sovereign Group for Corporate Tax Deregistration?
Navigating corporate tax deregistration can be daunting, but Sovereign Group provides expert guidance to ensure the process is seamless and efficient.
- Expert knowledge – Our team of qualified and experienced professionals have a deep understanding of UAE corporate tax regulations and the deregistration process.
- Comprehensive support – we can handle every aspect of deregistration, from filing applications to ensuring compliance with all legal requirements.
- Proven track record – Sovereign has successfully assisted numerous businesses with deregistration.
By entrusting Sovereign Group with your corporate tax deregistration, you can focus on the future while we manage the complexities. Contact us today to get started.
