VAT deregistration: when it is required and what must be notified
Registration does not end automatically when a business winds down. Article 5 of the VAT Law requires a Taxable Person to apply to cancel registration in the cases stipulated in the Common VAT Agreement, where a Resident Person’s total annual revenue does not exceed the Voluntary Registration Threshold in the period determined in the Regulations, and where a Non-Resident Person does not make any Taxable Supply during the period determined in the Regulations. Article 5 also provides that a Taxable Person who cancels registration remains liable for all obligations under the Law arising during the period of validity of the registration.
Article 13 of the Implementing Regulations gives effect to these rules. ZATCA Board Resolution No. (01-06-24), published in the Official Gazette on 18 April 2025, amended Paragraph (1) of Article 13 and added Paragraphs (13) and (14).
Cases in which deregistration is required
Cessation of the business activity. Amended Article 13(1) provides that if the taxable person ceases to conduct business activity, including cessation of legal personality or the assignment of the activity leading to the complete cessation of practising the business activity, it must cancel its registration. Cancellation is effective from the date specified by the Authority after its approval. The amended paragraph adds that, in all cases, the taxable person must fulfil all of its tax liabilities for the request to cancel the registration to be approved. This reflects Article 54(1)(a) of the Agreement, which requires deregistration on cessation of the Economic Activity.
A non-resident without reportable supplies. Article 13(2) requires a Nonresident Taxable Person to deregister where, at the end of any month, it has not made any Taxable Supplies in respect of which it is obligated to report Tax in the Kingdom in the most recent twelve-month period.
A resident below the thresholds. Article 13(3) requires a resident Taxable Person to deregister at the end of any month where all of the following occur:
- the total value of its annual Supplies or annual expenses in the twelve months then ended does not exceed the Voluntary Registration Threshold;
- the total value of its annual Supplies or annual expenses in the twenty-four months then ended does not exceed the Mandatory Registration Threshold; and
- the total value of its annual Supplies or annual expenses in that month and the eleven months following is not expected to exceed the Voluntary Registration Threshold.
The three tests are cumulative. Under the Agreement, the Mandatory Registration Threshold is SAR 375,000 (Article 50(2)) and the Voluntary Registration Threshold is fifty percent of the Mandatory Registration Threshold (Article 51(3)).
The thirty-day application period
Article 13(4) requires a Taxable Person to apply for deregistration to the Authority within thirty (30) days of any of the cases in Paragraphs (1), (2) or (3) occurring. Under Article 13(9), the application must be made in the form prescribed by the Authority. Article 13(10) allows the Authority to request documentation evidencing that the Economic Activity has ceased or evidencing the value of Taxable Supplies made or expected to be made, and Article 13(11) allows it to refuse the application where it does not have sufficient evidence of eligibility to deregister. Under Article 13(12), the Authority issues a notification confirming deregistration or refusing the application.
Deregistration by the Authority
Where a registered Taxable Person does not submit a request in accordance with Paragraphs (1) to (3), Article 13(5)(a) permits the Authority to deregister it, effective from the date on which the Person’s eligibility for registration ceased or from any other date the Authority determines. Under Article 13(5)(b), where the Authority determines that a registered Person was not eligible for registration, it may deregister the Person as of the date it determines. In all such cases, the Authority must issue a notice indicating the effective date. Article 54(5) of the Agreement likewise requires the Tax Authority to notify the Taxable Person of the deregistration and its effective date.
Optional deregistration
Article 13(6) permits a Taxable Person that is not required to deregister to apply to do so at the end of any month where its annual Supplies made in the Kingdom in the last twelve months do not exceed the Mandatory Registration Threshold and its expected annual Supplies in that month and the eleven months following do not exceed that threshold. The deregistration takes effect on the date determined by the Authority after approval (Article 13(7)).
Article 13(8) restricts this option for voluntary registrants: a taxable person registered voluntarily under Article 7, whose registration period has not exceeded twelve months and who has not stopped practising its economic activity, may not apply for deregistration. This does not affect the Authority’s power under Paragraph (5).
New notification on assignment of the activity
New Article 13(13) provides that, in the case of assignment of the activity, the assignee must notify the Authority of the assignment within thirty (30) days from the date of the assignment, in accordance with the mechanism specified by the Authority, unless the assignee has cancelled its registration in accordance with Paragraph (4). Where the assignment is intended to qualify as a transfer of an economic activity outside the scope of Tax, the separate notification requirements of amended Article 17 also apply.
Records and liabilities after cancellation
New Article 13(14) requires a taxable person whose registration has been cancelled to keep the invoices, notices, books and records stipulated in the Regulations for the periods set out in Article 66. In all cases, cancellation does not prejudice the obligation to pay any dues to the Authority arising before the date of cancellation. This aligns with Article 5 of the VAT Law. A business that ceases its activity should also consider the deemed supply rules for goods it retains, addressed in Articles 15 and 20(6) of the Regulations.
Instruments relied on: Implementing Regulations, ninth edition, 26/11/1444H corresponding to 15/6/2023G, unofficial English translation, Articles 13, 15, 17, 20(6) and 66, with Article 13(1) amended and Article 13(13) and (14) added by ZATCA Board Resolution No. (01-06-24) dated 17/05/1446H, published in the Official Gazette (Umm Al-Qura, issue 5082) on 18 April 2025, unofficial English translation; VAT Law, Article 5; Common VAT Agreement, Articles 50(2), 51(3) and 54. The Arabic text prevails.