A taxable person in Saudi Arabia must apply to cancel their VAT registration when they cease carrying on their economic activity, or if, being resident, their supplies no longer exceed the Voluntary Registration Threshold, or if, being nonresident, they have made no taxable supply during the period prescribed by the Regulations, and this application must be submitted within 30 days of the relevant case arising.
Cases of Mandatory Deregistration
The VAT Law provides that a taxable person must apply to cancel their registration in any of the cases stipulated in the Unified VAT Agreement, or if, being resident, their total annual turnover does not exceed the Voluntary Registration Threshold during the period prescribed by the Regulations, or if, being nonresident, they have not made any taxable supply during the period prescribed by the Regulations.
Detailed Conditions Under the Implementing Regulations
The Implementing Regulations detail these cases, providing that a resident taxable person must deregister at the end of any month in which all of the following conditions are met together: the total value of their annual supplies or expenses in the twelve months then ended does not exceed the Voluntary Registration Threshold; this value in the twenty-four months then ended does not exceed the Mandatory Registration Threshold; and their supplies or expenses in that month and the following eleven months are not expected to exceed the Voluntary Registration Threshold. A nonresident taxable person must deregister where they have not made any taxable supply requiring a declaration in the Kingdom in the most recent twelve-month period.
The Deadline for Applying to Deregister
A taxable person must apply to the Authority for deregistration within 30 days of any of the above cases occurring; if they do not apply, the Authority may deregister them on its own initiative and notify them accordingly. Recent amendments also clarified that the full transfer of an economic activity to another person constitutes a valid reason for VAT deregistration.
Obligations After Deregistration
Deregistration does not relieve the taxable person of any obligations owed to the Authority that arose before the cancellation date, and they remain required to retain invoices, books and records for the period prescribed by the Regulations, regardless of the reason for deregistration. The Authority has also clarified that where a taxable person does not apply for deregistration despite one of the prescribed cases arising, it may deregister that person on its own initiative and notify them of the effective date.
Illustrative Example
If a resident business's supplies over the past twelve months were only SAR 150,000 (below the SAR 187,500 Voluntary Registration Threshold), its supplies over the past twenty-four months were also below the SAR 375,000 Mandatory Registration Threshold, and it is not expected to exceed SAR 187,500 over the next twelve months, it must apply to deregister within 30 days of the end of the month in which all these conditions were met together.
Legal References
- Value Added Tax Law — Article Five.
- IMPLEMENTING REGULATIONS OF THE VALUE ADDED TAX LAW — Article 13 (cases of deregistration and the 30-day deadline).
- Guideline for Amendments to the Implementing — the section on the amendments to Article 13 regarding the transfer of an economic activity.
For questions about your specific situation, you can ask the Saudi Arabia Tax & Legislation Helper on Helpers, or consult a licensed chartered accountant.