When a company enters formal voluntary UAE liquidation procedures in the UAE, in addition to Regulatory Authority and other agency clearances, all outstanding tax obligations must be cleared before the business can be formally deregistered.
Under Federal Law, this requirement applies to all registered entities, regardless of size, structure, or industry. All tax affairs related to Corporate Tax, VAT, Excise Tax, and customs duties must be settled with the Federal Tax Authority (FTA) to avoid delays, penalties, or rejection of deregistration applications.
Voluntary liquidations procedures require diligent management and this article outlines the tax clearance process during liquidation, including applicable taxes, documentation requirements, statutory deadlines, and the implications of non-compliance.
Understanding the Liquidation Process in the UAE
Voluntary Liquidation is the formal procedure of winding down a company’s operations and removing it from the commercial register. Under Voluntary procedures all liabilities must be settled and due procedures on clearances from relevant Government agencies and banking are prerequisites. This requires coordination across regulatory, legal, and financial obligations, including the settlement of outstanding tax liabilities.
The standard liquidation process includes the following key steps:
- Shareholder Resolution: A resolution is passed by the shareholders to initiate liquidation.
- Appointment of Liquidator: A licensed liquidator is appointed to manage the company’s affairs, including verifying the company settling liabilities, disposing of assets, and preparing final accounts.
- Notification to Authorities: The relevant authorities such as the Department of Economy and Tourism (DET), Ministry of Economy, and any applicable free zone authorities must be formally notified. A public notice is issued to allow creditors to submit claims.
Before a company can be deregistered, all tax obligations must be cleared with the Federal Tax Authority (FTA). Failure to do so will delay the deregistration and may result in penalties.
Key Tax Obligations to Address During Liquidation
As part of the liquidation process, a company must settle all applicable tax liabilities before it can be formally de-registered. This includes filing final tax returns, paying any outstanding dues, and submitting de-registration applications to the Federal Tax Authority (FTA) where required.
The key taxes that companies must clear include Value Added Tax (VAT), Corporate Tax (CT), Excise Tax, and customs duties.
Value Added Tax (VAT)
VAT- registered companies are required to file a final VAT return that covers all taxable sales, purchases, and VAT owed up to the liquidation date. Outstanding VAT liabilities must be paid in full, followed by an application for VAT de-registration.
- Deadline: The de-registration must be completed within 20 business days from when taxable activities cease or taxable revenue falls below AED 375,000.
- Final VAT Return: Due within 28 days of approval.
- Penalty for Late Deregistration: AED 10,000.
Corporate Tax (CT)
For businesses subject to Corporate Tax (taxable income exceeding AED 375,000), a final corporate tax return must be submitted, reflecting taxable income up to the cessation date.
- Deadline: Applications for de-registration should be filed within 3 months of ceasing business activities.
- Penalty: AED 1,000 per month for late deregistration, capped at AED 10,000.
- FTA Penalty Waiver Initiative: Businesses can avoid or recover penalties for late registration if they file returns within 7 months of the first tax period.
Excise Tax
Excise tax applies to specific goods such as tobacco and energy drinks. Companies registered for excise tax must file a final excise tax return and submit a de-registration application if they no longer conduct excise-related activities.
- Deadline: Application must be submitted within 30 days of becoming ineligible.
- Additional Requirement: Final inventory audit for excise goods.
Customs Duties
Customs duties on imported goods must also be settled before liquidation can be completed. Clearance involves ensuring all customs declarations are finalized, and approvals obtained for goods transfer or disposal.
Documentation Required for De-registration
Once all outstanding tax obligations are resolved, the company must prepare and submit specific documents to complete the tax de-registration process with the Federal Tax Authority (FTA). These include at a minimum:
- Cancelled Trade License
- Shareholder Liquidation Resolution
- Final Financial Statements
- Final Tax Returns for VAT, CT, and Excise Tax
Once the FTA reviews these documents, VAT and excise tax registration will be de-registered, and the company’s Corporate Tax Registration Number (TRN) will be officially cancelled.
Penalties for Non-Compliance
Companies that fail to meet their tax obligations during liquidation may face administrative delays and financial consequences under UAE tax regulations:
- Late VAT De-registration: AED 10,000
- Late Corporate Tax De-registration: AED 1,000 per month, capped at AED 10,000
- Unpaid Taxes: Liquidation will not proceed until liabilities are cleared
- Director Liability: Directors may be held personally liable for unsettled tax dues
Timelines and Costs Involved
The duration of the liquidation process varies depending on the company type and complexity of tax obligations:
| Category | Typical Duration | Estimated Cost (AED) |
| Mainland Company Liquidation | 60 – 90 days | 7,000 – 30,000+ |
| Free Zone Company Liquidation | 30 – 60 days | 5,000 – 20,000+ |
| Offshore Company Liquidation | 20 – 45 days | 4,000 – 15,000+ |
| VAT De-registration | ~20 business days | Included in advisory |
| CT De-registration | Up to 3 months | Included in advisory |
| Final Audit Report | – | 2,500 – 10,000+ |
| Employee Visa Cancellations | – | 500 – 800 per visa |
| Newspaper Advertisement | – | 1,500 – 2,500 |
| Liquidator Fees | – | 5,000 – 15,000+ |
| FTA Clearance Certificate | – | 50 (minimum) |
Best Practices for Tax Compliance During Liquidation
Following best practices ensure timely company liquidation in UAE and avoid penalties from the Federal Tax Authority (FTA). As an FTA approved Tax Agency with ISO 9001, ISO 27001, and ISO 42001 certifications, SimplySolved recommends the following steps:
- Start Early: Begin addressing tax obligations early to allow ample time for filing returns and resolving issues.
- Engage a Tax Advisor: Work with an FTA approved advisor such as SimplySolved that familiar with UAE tax regulations and FTA procedures
- Maintain Accurate Records: Simplify audits and ensure accurate tax filings.
- Meet Deadlines: Avoid fines and delays by adhering to statutory timelines.
- Monitor FTA Communication: Regularly check the EmaraTax portal for updates or requests.
Conclusion
Settling outstanding tax obligations is a mandatory requirement in completing the company liquidation process in the UAE. All VAT; Corporate Tax, Excise Tax, and customs liabilities must be cleared before initiating final deregistration to prevent penalties and processing delays.
By maintaining accurate records, adhering to filing deadlines, and appointing qualified tax and liquidation advisors, businesses can complete the process efficiently and in compliance with FTA regulations.
About SimplySolved
SimplySolved is an FTA approved Tax Agency certified to ISO 9001, ISO 27001, and ISO 42001 standards. Our liquidation support services help businesses meet their tax obligations and complete de-registration with minimal risk or delay.
From VAT and Corporate Tax de-registration to EmaraTax compliance, final audits, and coordination with regulatory bodies, we provide complete assistance throughout the liquidation process. With integrated capabilities across accounting, tax, and compliance, SimplySolved ensures every step aligns with UAE legal and tax authority requirements.
