For international businesses operating in the UAE, excise tax compliance is more than a regulatory requirement—it’s a critical part of smooth business operations. Introduced in 2017, the excise tax applies to specific goods like tobacco, carbonated drinks, and energy drinks. While registration and filing are well-known obligations, many businesses overlook the importance of excise tax deregistration when they stop dealing with excisable goods.
Deregistration is essential to legally close tax obligations, avoid penalties, and maintain credibility with investors and regulators. Understanding how, when, and why to deregister ensures that your business remains compliant while exiting the excise tax regime efficiently.
What is Excise Tax Deregistration in UAE?
Excise Tax Deregistration is the official process of canceling a business’s excise tax registration with the Federal Tax Authority (FTA). This process is required when a company no longer produces, imports, or stocks excisable goods. Deregistration helps businesses legally end their excise obligations and provides clarity for auditing, financial reporting, and future operations.
Situations requiring deregistration include:
- The company stops manufacturing or importing excisable goods.
- The business is winding down or closing permanently.
- The company restructures in a way that removes it from the scope of excise tax.
Timelines are critical: The FTA expects deregistration requests to be submitted within 30 days of becoming ineligible to remain registered. Delays can result in fines and interest.
Why International Businesses Should Pay Attention?
Understanding and adhering to the Excise Tax Deregistration process in the UAE is crucial for international businesses. Failing to comply can lead to significant financial penalties, legal complications, and damage to your company's reputation. Here's why this matter deserves your immediate attention:
- Avoiding Administrative Penalties: The UAE's Federal Tax Authority (FTA) mandates that businesses must apply for deregistration within 30 days of ceasing excise-related activities. Failure to do so results in an administrative penalty of AED 10,000, with additional fines for continued non-compliance.
- Ensuring Legal Compliance: Deregistering ensures that your business is no longer liable for excise tax obligations, preventing potential legal issues and audits. This step is essential for businesses that have ceased production, importation, or storage of excisable goods.
- Maintaining Investor Confidence: Proper deregistration demonstrates to investors and stakeholders that your business adheres to local regulations, enhancing credibility and trust. It signals that the company is responsibly managing its tax obligations and business activities.
- Streamlining Business Transitions: For companies undergoing mergers, acquisitions, or restructuring, deregistering excise tax accounts is a vital step. It ensures a clean break from previous tax liabilities, facilitating smoother transitions and financial clarity.
- Preventing Future Liabilities: Even after ceasing excise activities, failure to deregister can result in ongoing liabilities, including penalties and interest on unpaid taxes. Deregistration effectively halts any further tax obligations related to excisable goods.
Key Steps in Excise Tax Deregistration
Deregistering from excise tax is a crucial process for businesses that have ceased dealing with excisable goods. Proper deregistration ensures compliance, prevents unnecessary liabilities, and maintains a good standing with the Federal Tax Authority (FTA). Here's a step-by-step guide to navigate the deregistration process:
Confirm Eligibility for Deregistration
Before initiating the process, ensure your business meets the criteria for deregistration:
- You have ceased producing, importing, or stockpiling excisable goods.
- You do not intend to resume such activities within the next 12 months.
- All excise tax returns have been submitted, and any outstanding liabilities are cleared.
Submit the Deregistration Application via EmaraTax
The FTA facilitates the deregistration process through its official portal, EmaraTax. To initiate the process:
- Log in to your EmaraTax account.
- Navigate to the "Excise" section.
- Click on "Actions" and select "De-Register."
- Complete the deregistration application form, providing accurate details about your business cessation.
Settle All Outstanding Tax Liabilities
Before the FTA can approve your deregistration request, all dues must be cleared:
- Submit any pending excise tax returns, including the final return covering the period up to deregistration.
- Pay any outstanding excise tax, penalties, or interest.
Provide Necessary Documentation
Supporting documents may be required to validate your deregistration request:
- Proof of cessation of excise activities (e.g., closure reports, inventory write-offs).
- Authorized signatory declarations.
- Any other documents as specified by the FTA.
Await FTA Review and Approval
After submission, the FTA will review your application:
- The FTA typically processes deregistration requests within 20 business days.
- They may request additional information or clarification during this period.
- If approved, you will receive a Deregistration Certificate as proof of cancellation.
Retain Records for Future Reference
Even after deregistration, maintain all related records:
- Copies of all submitted tax returns and supporting documents.
- The Deregistration Certificate issued by the FTA.
- Correspondence with the FTA regarding the deregistration process.
Common Challenges for Foreign Companies in Excise Tax Deregistration in the UAE
Navigating the excise tax deregistration process in the UAE can present several challenges for foreign companies. Understanding these common obstacles is crucial to ensure compliance and avoid potential pitfalls.
- Delayed Deregistration Applications
One of the most frequent errors is failing to apply for deregistration promptly. Businesses that cease dealing in excisable goods are required to submit a deregistration request within 30 days. Delays beyond this period can result in administrative penalties and continued tax obligations, even if the business is no longer operational. - Incomplete or Inaccurate Documentation
The Federal Tax Authority (FTA) mandates comprehensive documentation to process deregistration requests. Foreign companies may struggle with providing the necessary records, such as audited financial statements, stock inventories, and proof of cessation of excise-related activities. Incomplete or inaccurate submissions can lead to delays or rejections of the deregistration application. - Misunderstanding of Regulatory Requirements
The UAE's excise tax regulations are subject to periodic amendments. For instance, as of November 2023, the FTA has the authority to deregister a business after six months of ceasing relevant activities, unless the business demonstrates intent to resume operations. Foreign companies may find it challenging to stay abreast of such changes, leading to non-compliance. - Accumulation of Outstanding Liabilities
Failure to settle outstanding excise tax liabilities before applying for deregistration can result in complications. The FTA may withhold approval until all dues are cleared, and interest or penalties may accrue on unpaid amounts - Lack of Awareness of Automatic Deregistration Provisions
Under certain conditions, the FTA may initiate deregistration if a business has not been active in excise-related activities for an extended period. However, businesses should not rely solely on this provision and should proactively apply for deregistration to ensure compliance and avoid potential issues.
How to Simplify the Deregistration Process?
Deregistering from the UAE's excise tax system is essential for businesses that no longer deal with excisable goods. Here's a clear, step-by-step guide to help you navigate the process efficiently:
1.Assess Eligibility
Ensure your business has ceased all activities related to excisable goods, such as production, importation, or stockpiling. Deregistration should be initiated within 30 days of becoming ineligible to remain registered.
2.Prepare Required Documentation
Gather all necessary documents, including:
- Final Excise Tax Returns: Submit all pending returns up to the deregistration date.
- Proof of Cessation: Provide evidence that your business has stopped excise-related activities.
- Authorized Signatory Declarations: Complete and submit all required declarations through the FTA portal.
3.Submit Deregistration Application via FTA Portal
Log in to your EmaraTax account and:
- Navigate to your Taxable Person Account.
- Under the "Excise" section, select "Actions" and choose "De-Register."
- Complete the online application form and upload all supporting documents.
4.Settle Outstanding Liabilities
Ensure all excise tax dues, penalties, and interest are paid. If applicable, request a refund for any credit balances before proceeding with deregistration.
5.Await FTA Review and Approval
The FTA will review your application and may request additional information. Upon approval, you'll receive a Deregistration Certificate as proof of cancellation.
6.Maintain Compliance Records
Keep all deregistration-related documents and communications for future reference and potential audits.
Conclusion
For international businesses operating in the UAE, understanding Excise Tax Deregistration is critical for maintaining compliance, avoiding penalties, and ensuring a smooth business transition. At Reyson Badger, we provide expert guidance and professional support to help businesses navigate the entire deregistration process efficiently. From filing final excise tax returns to clearing outstanding liabilities and obtaining FTA approval, our team ensures that every step is handled accurately and on time.
By partnering with Reyson Badger, businesses can focus on their core operations while we manage regulatory obligations, minimize risks, and maintain investor confidence. Our structured approach to excise tax deregistration ensures compliance, peace of mind, and a seamless exit from excise tax responsibilities in the UAE.
