The Rule: 20 Business Days to Deregister
If you're voluntarily registered for VAT (taxable supplies between AED 187,500 and AED 375,000) and your taxable supplies for the past 12 months drop below AED 187,500, you are required to apply for VAT deregistration within 20 business days of becoming aware of the drop.
The same applies if you were mandatorily registered (above AED 375,000) and your supplies have now dropped below AED 187,500 for 12 consecutive months — you must deregister within 20 business days.
(from the 20 business day deadline)
The penalty is AED 1,000 per month (or part of a month) for every month between the 20-business-day deadline and the date you actually submit the deregistration application. No cap. It keeps accumulating.
Real Case: AED 5,000 Penalty for 6-Month Delay
What Happened
A UAE company's taxable supplies dropped below AED 187,500 around September 2025. The company should have applied for deregistration within 20 business days — roughly by mid-October 2025.
Instead, the VAT deregistration application was submitted on 10 March 2026 — approximately 5 months late.
Result: The FTA imposed a AED 5,000 late deregistration penalty (5 months × AED 1,000/month).
A reconsideration request was submitted to request a waiver, but penalty waiver approval is not guaranteed and depends entirely on the FTA's review.
How the FTA Catches You — The Turnover Declaration
Many businesses wonder: "How does the FTA know when my revenue actually dropped?" The answer is simple — you tell them yourself.
When you apply for VAT deregistration on EmaraTax, you must submit two key documents:
1. Undertaking Letter: A signed declaration that the information you're providing is accurate and complete.
2. Turnover Declaration Letter: A declaration of your taxable supplies for the relevant periods — showing when your revenue dropped below the threshold.
The FTA uses the turnover declaration to calculate exactly when your supplies fell below AED 187,500. They then compare that date to the date you submitted the deregistration application. Every month in between = AED 1,000.
The turnover declaration is mandatory for deregistration. You cannot submit the application without it. And since the FTA also has your quarterly VAT returns on file (showing your taxable supplies each quarter), they can cross-check your declaration against your filed returns. Understating the timeline is risky — it could trigger an audit.
How to Check If You Need to Deregister — The Quarterly Assessment
Don't wait for the FTA to tell you. Assess every quarter whether your rolling 12-month taxable supplies have dropped below the threshold.
The test:
Step 1: Add up your taxable supplies for the last 4 quarters (12 months rolling).
Step 2: If the total is below AED 187,500 — and you don't expect it to exceed AED 187,500 in the next 30 days — you should apply for deregistration.
Step 3: Apply within 20 business days of identifying the trigger.
| Quarter | Taxable Supplies | Rolling 12-Month Total | Action Required? |
|---|---|---|---|
| Q1 2025 (Jan–Mar) | AED 60,000 | AED 250,000 | No — above AED 187,500 |
| Q2 2025 (Apr–Jun) | AED 45,000 | AED 210,000 | No — above AED 187,500 |
| Q3 2025 (Jul–Sep) | AED 30,000 | AED 175,000 | ⚠️ Yes — below AED 187,500 |
| Q4 2025 (Oct–Dec) | AED 20,000 | AED 155,000 | Already should have applied |
In this example, the trigger was Q3 2025 when the rolling 12-month total dropped to AED 175,000. The company should have applied for deregistration within 20 business days of realising this — roughly by mid-October 2025. Every month of delay after that = AED 1,000.
✅ Pro tip: At Fastlane, we review our VAT clients' rolling 12-month taxable supplies every quarter as part of our VAT filing service. If the threshold is approaching, we flag it immediately — so deregistration happens on time and penalties are avoided entirely.
Penalty Calculation Examples
| Revenue Dropped Below Threshold | 20-BD Deadline | Application Submitted | Months Late | Penalty |
|---|---|---|---|---|
| September 2025 | ~Mid-October 2025 | 10 March 2026 | ~5 months | AED 5,000 |
| June 2025 | ~Mid-July 2025 | January 2026 | ~6 months | AED 6,000 |
| January 2025 | ~Mid-February 2025 | May 2026 | ~15 months | AED 15,000 |
| March 2026 | ~Mid-April 2026 | April 2026 | 0 | AED 0 |
The last row shows the ideal scenario: recognise the trigger, apply within 20 business days, zero penalty. The AED 15,000 row shows what happens when you ignore it for over a year.
Need to Deregister? Don't Wait — Every Month Costs AED 1,000
We handle the full deregistration: application, undertaking letter, turnover declaration, EmaraTax submission. If a penalty applies, we submit a reconsideration request.
Can the Penalty Be Waived?
You can submit a reconsideration request to the FTA asking them to waive the penalty. However:
Approval is not guaranteed. It depends entirely on the FTA's review of your case.
Valid reasons may help: Genuine unawareness of the obligation, administrative errors, first-time offence, or extenuating circumstances.
No automatic waiver mechanism exists for late VAT deregistration penalties (unlike the CT late registration penalty which has a structured waiver initiative).
Fastlane submits reconsideration requests on behalf of clients — we draft the letter, present the case, and submit through EmaraTax. But we're transparent: the outcome is in the FTA's hands.
Before You Deregister — Don't Forget These Steps
File all pending VAT returns. Every quarter must be filed — including nil returns. The FTA won't process deregistration with outstanding returns. VAT filing from AED 199/quarter →
Apply for any VAT refunds. If you have recoverable input VAT, apply before deregistration — you lose the ability to claim refunds after the certificate is issued. VAT refund before deregistration →
Pay all outstanding penalties. Any existing penalties must be settled before the deregistration certificate is issued. Penalties before deregistration →
File the final VAT return. Covers the period from the last quarterly return to the effective deregistration date. Filing during deregistration →
💡 The irony: Many businesses delay deregistration because they think it's complicated or expensive. But the cost of not deregistering (AED 1,000/month penalty + continued quarterly filing obligations) is far higher than the cost of the deregistration itself. Act early.
Written & Reviewed by Nithin — FTA-Registered Tax Agent (TRN: 104218042400003)
Based on Cabinet Decision No. 40/2017 on administrative penalties, UAE VAT Executive Regulations, and actual FTA penalty assessments from Fastlane's VAT deregistration engagements in 2025–2026.