UAE VAT De-registration in IFZA Free Zone: Complete Guide

UAE VAT De-registration in IFZA Free Zone: Complete Guide

UAE VAT De-registration in IFZA Free Zone

The International Free Zone Authority (IFZA) is one of the most popular free zones in the UAE, attracting startups, SMEs, and international businesses. While IFZA offers operational flexibility, companies registered there are still subject to UAE VAT laws. If your IFZA company no longer meets VAT registration requirements or has ceased operations, VAT deregistration with the Federal Tax Authority (FTA) becomes mandatory.

This guide explains when, why, and how to deregister VAT for IFZA Free Zone companies—helping you avoid penalties and remain compliant.

VAT Applicability in IFZA Free Zone

A common misconception is that all free zone companies are exempt from VAT. In reality:

• IFZA is a non-designated free zone

• Standard UAE VAT rules apply

• VAT is charged at 5% on taxable supplies of goods and services

An IFZA company must register for VAT if:

• Its taxable supplies exceed AED 375,000 annually (mandatory), or

• It opts for voluntary registration at AED 187,500

If these conditions no longer apply, VAT deregistration must be considered

When is VAT Deregistration Required for IFZA Companies?

VAT deregistration is required when a business no longer meets the criteria to remain VAT-registered. The FTA requires companies to apply for deregistration within 20 business days of becoming eligible.

Common Deregistration Scenarios

a) Business Closure or License Cancellation

If your IFZA company has permanently stopped trading or is under liquidation, VAT deregistration is mandatory

b) Turnover Below Mandatory Threshold

If taxable supplies in the last 12 months fall below AED 375,000 and are not expected to exceed this threshold again, deregistration is required.

C) Voluntary Deregistration Eligibility

You may voluntarily deregister if:

• Taxable supplies or expenses are below AED 187,500

• You no longer intend to make taxable supplies

(Note: Businesses that voluntarily registered must usually remain registered for at least 12 months before deregistering.)

d) Business Restructuring or Activity Change

Changes such as mergers, activity cessation, or conversion to exempt supplies may trigger VAT deregistration.

VAT Deregistration Process for IFZA Free Zone

VAT deregistration is completed online through the FTA EmaraTax portal.

Step-by-Step Process

1) Log in to your EmaraTax account

2) Access your VAT profile

3) Select “VAT Deregistration”

4) Choose the deregistration reason

5) Upload required supporting documents

6) Submit the application for FTA review

FTA may request additional clarification before approval.

Documents Required for VAT Deregistration

The FTA may request the following documents depending on your case:

1) IFZA trade license cancellation or suspension

2) Financial statements showing reduced turnover

3) Proof of business cessation

4) Board resolution or official declaration

5) Latest VAT returns and payment confirmations

Submitting accurate documentation speeds up approval and reduces audit risk.

Final VAT Return & Settlement

Once your VAT deregistration request is approved:

• A final VAT return must be filed up to the deregistration effective date

• All outstanding VAT liabilities must be paid

• VAT may be due on remaining stock or business assets

Failure to submit the final return on time can delay deregistration or trigger penalties.

Penalties for Late VAT Deregistration

If an IFZA company fails to apply for deregistration within the required timeline, the FTA may impose penalties of up to AED 10,000.

Late deregistration can also lead to:

• Continued VAT filing obligations

• Accumulating administrative penalties

• Complications during company closure or banking processes

Timely action is essential.

Post-Deregistration Compliance Obligations

Even after VAT deregistration:

• VAT records must be retained for at least 5 years

• VAT must no longer be charged on invoices

• Accounting systems must be updated accordingly

FTA retains the right to audit past periods after deregistration.

Why VAT Deregistration Matters for IFZA Businesses

Correct VAT deregistration helps IFZA companies:

• Avoid unnecessary compliance costs

• Prevent FTA penalties and audits

• Complete business closure smoothly

• Maintain a clean tax compliance history

Conclusion

VAT deregistration for IFZA Free Zone companies is a critical compliance step when business circumstances change. Whether your turnover has dropped, your operations have ceased, or your company is restructuring, timely and accurate deregistration protects you from penalties and future liabilities.