Are zero-rated supplies taxable supplies for UAE VAT?

Yes. Under UAE VAT law, taxable supplies include both standard-rated (5%) and zero-rated (0%) supplies. Only exempt supplies are not taxable supplies. So if your VAT deregistration basis is 'Business no longer making taxable supplies' but you answer 'Yes' to 'Are you making zero-percent supplies?', the form contradicts itself — you have told the FTA you are still making taxable supplies.

Why does the FTA keep asking me to clarify the reason for VAT deregistration?

The FTA is not only checking whether your licence is cancelled — it is verifying that your deregistration basis is correct and that the business has genuinely stopped making taxable supplies. A short note like 'closed business and cancelled licence' may be directionally correct but too brief, and if the form still shows you making zero-rated (taxable) supplies, the officer cannot reconcile it and will keep asking. The fix is a fuller written reason plus correcting the contradicting field.

Can I deregister for VAT if I made zero-rated supplies before closing?

Yes. If the business made zero-rated supplies only up to the cessation date and has stopped, you can still deregister on the basis that it is no longer making taxable supplies. State clearly in your clarification that any zero-rated supplies were made only until the cessation date and that no supplies have been made since — so the FTA does not read them as ongoing taxable supplies.

VAT Deregistration: Why the FTA Keeps Asking You to "Clarify the Reason" (2026)

Q: What happens if I don't respond to the FTA's request within 20 days?

When the FTA requests additional information on a VAT deregistration application, you must respond within 20 calendar days of the notification. If you do not, the application is automatically closed in the system and you must submit a new application. Separately, failing to apply for deregistration within the required timeframe can attract an administrative penalty of AED 1,000, repeating monthly, up to a maximum of AED 10,000.

⚡ Quick answer

When the FTA repeatedly asks you to "clarify the reason for deregistration," it's usually not doubting your licence — it's checking that your basis is correct and that the business has truly stopped making taxable supplies. If your basis is "Business no longer making taxable supplies" but you've answered "Yes" to "Are you making zero-percent supplies?", the form contradicts itself — because zero-rated (0%) supplies are still taxable supplies. Fix the field (set it to No if you've stopped), give a fuller written reason, re-attach the cancelled-licence certificate, and resubmit within 20 calendar days — or the application auto-closes.

It's one of the most frustrating moments in a VAT deregistration. The business is closed, the trade licence is cancelled, you've uploaded the cancellation certificate — and the FTA officer still writes back: "Kindly clarify the reason for deregistration." You reply briefly, and a few days later the same request appears again.

The instinct is to assume the officer didn't read your note. More often, the officer read it fine — and then looked at your form, which is telling a different story. Here's what's really happening, and exactly how to break the loop.

What's really being checked

The FTA isn't asking "is the licence cancelled?"

The question looks simple, but it's a substantive check. The officer is really asking two things at once:

Is the basis of deregistration you selected actually correct for your situation?
Has the business genuinely stopped making taxable supplies — with nothing in the file suggesting otherwise?

A one-line answer such as "closed business and cancelled licence, copy attached" is directionally right, but it's too thin to close that check — especially if something elsewhere in the form says you're still making taxable supplies. That's the contradiction the officer can't ignore.

The contradiction, decoded

The field that quietly undoes your application

Look at a typical VAT De-Registration form where the basis is cessation due to licence cancellation. Here's the part that trips people up (illustrative — your screen will differ):

VAT De-Registration — Entity Details illustrative · not real data

Basis & status

Basis of DeregistrationBusiness no longer making taxable supplies

StatusCancellation of the License

Supplies declaration

Are you making zero-percent supplies? ⚠️Yes

Are you making non-taxable supplies?No

The basis says you've stopped taxable supplies — but "zero-percent supplies? = Yes" says you're still making them. To the officer, those two statements can't both be true.

⚠️ Why this causes the loop

Your written note says the business has closed. Your form says you're still making zero-percent (zero-rated) supplies. Because zero-rated supplies are taxable supplies, the officer reads that as "still trading" — which is inconsistent with your basis. So they ask again. No amount of re-explaining in the notes will settle it until the field itself is corrected.

The concept that fixes it

Zero-rated is not the same as exempt

This is the heart of it. Under UAE VAT, "taxable supplies" is a wider bucket than most people assume:

Standard-rated (5%) — a taxable supply.
Zero-rated (0%) — e.g. qualifying exports of goods/services. Charged at 0%, but still a taxable supply.
Exempt — e.g. certain financial services, bare land, local passenger transport, residential property leases. These are not taxable supplies.

So taxable supplies = standard-rated + zero-rated. If you've genuinely closed, you are no longer making either — which means "Are you making zero-percent supplies?" should be No. Leaving it on "Yes" tells the FTA the opposite of your basis.

The subtle trap

"Zero-percent" sounds harmless — it's 0%, after all. But VAT treats it as a positive taxable activity, not as "no supplies." That single word, "Yes," is enough to keep a clean deregistration in limbo.

The reply

A model clarification note you can adapt

Replace the one-liner with a complete reason that covers the basis, the cessation, the evidence, and the forward-looking pledge. Something like:

📝 Model note to the officer

The reason for VAT deregistration is the cessation of taxable business following cancellation of the trade licence.

The company has ceased business operations and is no longer making any taxable supplies in the UAE — neither standard-rated nor zero-rated. The trade licence has been cancelled, and the cancellation certificate is attached as supporting evidence.

The company does not expect to make any taxable supplies within the next 12 months. Accordingly, deregistration is requested on the basis that the business is no longer making taxable supplies due to licence cancellation.

If you did make zero-rated supplies right up to closure, add a line: "Any zero-rated supplies were made only until the cessation date of [date]; no supplies have been made since." That stops the FTA reading them as ongoing.

Before you resubmit

The 4-point checklist that breaks the loop

Change "Are you making zero-percent supplies?" to No — if you've stopped exports / zero-rated sales. This is the single most important fix.
Re-attach the cancelled licence / cancellation certificate in the correct upload field, so the evidence is clearly on file.
Frame any past zero-rated sales as "until the cessation date" — never as continuing supplies.
Confirm the basis and status reconcile — "no longer making taxable supplies" + "cancellation of the licence" should tell one consistent story with your note.

The FTA isn't doubting that you closed — it's reconciling your form. The moment your answers say "no taxable supplies" and "still making zero-rated supplies" at the same time, the officer has no choice but to ask again.

The clock

You have 20 days — and missing it has a cost

When the FTA requests additional information, the notice gives you a deadline: respond within 20 calendar days of the notification. Miss it and the consequence is automatic and unforgiving:

The application auto-closes in the system — and you must start over with a brand-new deregistration application.
Late deregistration carries its own penalty — failing to apply for deregistration within the required timeframe can trigger an administrative penalty of AED 1,000, repeating monthly on the same date, up to a maximum of AED 10,000.

20 days

To reply, or the application auto-closes

0% = taxable

Zero-rated still counts as a taxable supply

AED 10,000

Max late-deregistration penalty

✅ Get it right on the resubmission

Most "clarify the reason" loops end the moment the form and the note agree with each other. Correct the zero-percent field, attach the certificate, send the fuller reason, and submit inside the window — and the officer has everything needed to approve.

Sources & authority: UAE VAT framework under Federal Decree-Law No. 8 of 2017 (as amended) and its Executive Regulations. "Taxable supplies" comprise standard-rated (5%) and zero-rated (0%) supplies; exempt supplies are not taxable supplies. Deregistration is required when a registrant stops making taxable supplies and does not expect to make them within the following 12 months. On an additional-information request, the applicant must respond within 20 calendar days of the notification or the application is automatically closed and must be re-filed. Failure to apply for deregistration within the required timeframe can attract an administrative penalty of AED 1,000, recurring monthly, up to a maximum of AED 10,000 (per FTA EmaraTax notices). Rules and figures can change — confirm current details with the FTA or your tax agent.

Stuck in the "clarify the reason" loop?

As an FTA-registered tax agent, Fastlane reviews your deregistration form for the contradictions that trigger officer queries, drafts the clarification note, fixes the supplies fields, and resubmits before the 20-day clock runs out.

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FAQ

Frequently asked questions

Are zero-rated supplies taxable supplies?

Yes. Taxable supplies include both standard-rated (5%) and zero-rated (0%) supplies. Only exempt supplies are non-taxable. So answering "Yes" to "Are you making zero-percent supplies?" while choosing a basis of "no longer making taxable supplies" contradicts itself.

Why does the FTA keep asking me to clarify the reason?

Because it's verifying that your basis is correct and the business has genuinely stopped making taxable supplies. A very short note, plus a form field that still shows zero-rated (taxable) supplies, can't be reconciled — so the officer asks again until the form and the note agree.

What happens if I don't reply within 20 days?

The application is automatically closed in the system and you must submit a new one. Separately, applying late for deregistration can trigger an administrative penalty of AED 1,000, repeating monthly, up to a maximum of AED 10,000.

I made zero-rated exports until I closed — can I still deregister?

Yes. State clearly that any zero-rated supplies were made only until the cessation date and that none have been made since. That way the FTA reads them as historic, not ongoing, and your "no longer making taxable supplies" basis holds.

What evidence should I attach for cessation?

The cancelled trade licence or cancellation certificate is the key document, attached in the relevant upload field. Depending on the case, the FTA may also expect financial documents showing income/expenses up to the cessation date and a pledge not to make taxable supplies in the next 12 months.

Nithin Pathak

Founder & Managing Partner — Fastlane Management Consultancy · FTA-Registered Tax Agent · MoE-Approved Auditor

Fastlane Management Consultancy handles UAE VAT deregistration end to end — getting the basis and form right the first time, drafting clarification notes for FTA officer queries, and filing the final return so the application clears without the back-and-forth.

This article is for general information only and does not constitute legal or tax advice. VAT deregistration requirements, timeframes and penalties are set by the Federal Tax Authority and can change; confirm current details with the FTA or a registered tax agent. Any form layout, wording or example shown is illustrative and contains no real taxpayer data. For VAT deregistration support, contact Fastlane Consultancy.