UAE VAT De-registration in RAKEZ Free Zone: Complete Guide for Businesses

UAE VAT De-registration in RAKEZ Free Zone: Complete Guide for Businesses

UAE VAT De-registration in RAKEZ Free Zone :

The Ras Al Khaimah Economic Zone (RAKEZ) is a preferred destination for startups, SMEs, and international companies due to its cost-effective setup and flexible business environment. However, when it comes to taxation, RAKEZ companies are fully subject to UAE VAT laws.

If your RAKEZ business no longer meets VAT registration requirements or has ceased operations, applying for VAT deregistration with the Federal Tax Authority (FTA) is a legal obligation. This guide explains everything you need to know about VAT deregistration in RAKEZ—when it applies, how to apply, and how to avoid penalties.

VAT Applicability for RAKEZ Free Zone Companies :

A common misunderstanding is that free zone companies are automatically exempt from VAT. In reality:

• RAKEZ is a non-designated free zone

• Standard UAE VAT rules apply

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

A RAKEZ company must register for VAT if:

• Its taxable supplies exceed AED 375,000 in the last 12 months (mandatory registration), or

• It opts for voluntary registration at AED 187,500It opts for voluntary registration when supplies or expenses exceed AED 187,500

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

When is VAT Deregistration Required in RAKEZ?

According to UAE VAT law, a business must apply for VAT deregistration within 20 business days from the date it becomes eligible. Failing to do so can result in penalties.

Common Reasons for VAT Deregistration

a) Business Closure or License Cancellation

If your RAKEZ company has permanently ceased operations or is undergoing liquidation, VAT deregistration becomes mandatory.

b)Taxable Turnover Falls Below the Mandatory Threshold

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

C) Voluntary VAT Deregistration

You may apply for voluntary deregistration if:

• Your taxable supplies or expenses are below AED 187,500, and

• You do not expect them to increase in the near future

(Note: Businesses that voluntarily registered for VAT must generally remain registered for at least 12 months before applying for deregistration.)

d) Change in Business Activities or Structure

If your business activities become VAT-exempt or your company merges or restructures, VAT deregistration may be necessary.

VAT Deregistration Process for RAKEZ Companies :

VAT deregistration is carried out online through the FTA’s EmaraTax portal.

Step-by-Step Process

1) Log in to your EmaraTax account

2) Open your VAT registration profile

3) Select “Apply for VAT Deregistration”

4) Choose the reason for deregistration

5) Upload supporting documents

6) Submit the application for FTA review

The FTA may request additional clarification or documents before approving the request.

Documents Required for VAT Deregistration :

Depending on your situation, the FTA may require:

1) RAKEZ 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 VAT payment receipts

Accurate documentation is critical to ensure smooth and timely approval.

Final VAT Return & Settlement :

After the deregistration request is approved:

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

• All outstanding VAT liabilities must be settled

• VAT may be payable on remaining stock or business assets

Failure to file the final VAT return on time may delay deregistration or result in penalties.

Penalties for Late VAT Deregistration :

If a RAKEZ company fails to apply for VAT deregistration within the required timeframe, the FTA may impose penalties of up to AED 10,000.

Late deregistration can also lead to:

• Continued VAT filing obligations

• Accumulation of administrative fines

• Complications during company closure or audits

Timely deregistration is essential to avoid unnecessary financial and legal risks.

Post-Deregistration Compliance Obligations :

Even after VAT deregistration is completed, businesses must:

Late deregistration can also lead to:

• Retain VAT records for at least 5 years

• Stop charging VAT on invoices from the deregistration effective date

• Update accounting and invoicing systems accordingly

The FTA may still audit previous VAT periods after deregistration.

Why VAT Deregistration is Important for RAKEZ Businesses :

Correct VAT deregistration helps RAKEZ companies:

• Avoid ongoing VAT compliance costs

• Prevent FTA penalties and audits

• Complete business closure smoothly

• Maintain a clean tax compliance record

Conclusion :

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