Liquidation of a Company in UAE: VAT & AML Obligations Before You Close Shop

When planning a company's liquidation in the UAE, every business must complete certain financial and compliance steps before closure. The liquidation process in the UAE is not only cancelling the trade license, but it also involves clearing VAT obligations and fulfilling Anti-Money Laundering (AML) and Counter Financing Terrorism (CFT) record-keeping requirements.

Failing to meet these obligations can lead to penalties and future liabilities, even after the company is closed. This guide explains the key VAT and AML/CFT requirements you need to complete before finalizing business liquidation in the UAE.

Understanding Company Liquidation in UAE

Company liquidation in UAE is a formal legal process under Federal Decree-Law No. 32 of 2021 on Commercial Companies. It involves closing a business in an orderly and compliant way by selling assets, settling debts, cancelling the trade license, and deregistering with authorities such as the FTA, Ministry of Economy, or relevant Free Zone Authority.

Allowing a license to expire does not end a company’s legal or tax obligations. Proper liquidation ensures that all liabilities are cleared and protects business owners, employees, and creditors from future legal or financial risks.

VAT Obligations Before Liquidation

You must apply for VAT deregistration within 20 business days of ceasing operations or when taxable supplies fall below AED 187,500 for 12 months. Delayed submission attracts penalties of AED 1,000 for the first delay and AED 1,000 per month thereafter, up to AED 10,000.

Key requirements & deadlines

• If your business stops making taxable supplies and does not expect supplies in the next 12 months, you must apply for deregistration.

• If your 12-month taxable supplies fall below AED 187,500 (and you don’t expect to exceed it in the next 30 days), deregistration becomes mandatory.

• The application should be submitted within 20 business days of meeting the conditions.

• Required documents include the cancelled trade license or liquidation letters, board resolution, latest financial statements, etc.

• The FTA may take about 20 business days to process a completed application; delays may arise if additional info is requested.

• Penalties apply for late submission, e.g., AED 1,000 for initial delay, plus AED 1,000/month up to AED 10,000.

• Once approved, the TRN (Tax Registration Number) is cancelled; you stop charging VAT, and you cannot reclaim input VAT thereafter.

Final VAT Return and Record Keeping

Before VAT deregistration is approved, businesses must file their final VAT return and clear all outstanding liabilities.
After deregistration, VAT records must be retained for at least five (5) years, as required by the FTA.

These records include:

• Sales and purchase invoices

• VAT returns and payment receipts

• Import and export documentation

• Financial statements related to taxable supplies

Maintaining these records ensures that, even after company closure in UAE, the FTA can verify past compliance if required.

AML/CFT Obligations Before Company Liquidation

When a company in the UAE is classified as a Designated Non-Financial Business or Profession (DNFBP), for example, real-estate brokers, accountants, dealers in precious metals, or corporate-service providers enter liquidation or are being wound up, it continues to bear AML/CFT obligations under the new AML framework (Federal Decree-Law No. 10 of 2025).

Key obligations

• Under the Federal Decree-Law No. 10 of 2025 on Anti-Money Laundering and Combating the Financing of Terrorism (as amended) and the implementing regulation, entities must retain records of company formation, registration, changes in beneficial ownership, etc., for a minimum of 5 years from the date of liquidation/dissolution.

• Records must be maintained in an organized way, allowing competent authorities to reconstruct transactions and business relationships.

• The five-year retention period begins with the latest liquidation or dissolution date, termination of business relationship, closure of account, etc.

AML/CFT Record Keeping Requirements

Records to be maintained include:

• Company formation, registration, amendments (e.g., MOA, AOA, changes in share registers)

• Details of beneficial owners, shareholders, senior management and legal representatives

• Identity-verification documents (passports, Emirates ID, address proof)

• Legal-arrangements records, trustees/controlling persons, changes in ownership structure

• Customer files, transaction history, internal audit logs, AML training records, compliance-officer appointment letters

These must be securely stored, retrievable upon request, and accessible for potential inspection by the relevant supervising authority.

Final AML/CFT Review and Record Retention

Before the liquidation is concluded:

• The entity that includes the liquidator or administrator should conduct a final AML/CFT review to ensure all CDD/KYC files are complete and archived appropriately.

• All AML/CFT policies, procedures, and internal controls should be documented, approved by senior management, and records included in the archive.

• Ensure all transaction-monitoring and reporting obligations are fulfilled (STRs/suspicious-activity reports submitted, records saved).

• Even after the company ceases operations, archives must remain available, so authorities may review past financial crime risks or reconstruct historical transactions.

Note: Under Federal Decree-Law No. 10 of 2025, Executive Regulations are expected to provide further details on retention periods and archival requirements for DNFBPs and other entities.

Steps for a Smooth Company Closure in UAE

1. Appoint a licensed liquidator to prepare the liquidation report.

2. Settle all liabilities, including VAT, employee dues, and supplier payments.

3. File for VAT deregistration with FTA.

4. Complete AML/CFT record reviews and store all compliance documentation.

5. Submit final liquidation documents to the relevant authority or free zone registrar.

6. Cancel all visas, bank accounts, and trade licenses.

Completing Liquidation, the Right Way!

Proper compliance during company liquidation in the UAE protects owners and shareholders from penalties or legal issues. Both VAT deregistration and AML compliance in the UAE are mandatory parts of the liquidation process and must be handled before company closure in the UAE.

Whether you are managing a company liquidating in Dubai or any other emirate, maintaining records for five years and completing the required returns and reviews will ensure your exit is clean and compliant.

Knowing how to liquidate a company in UAE the right way helps you close operations confidently and avoid future complications.

Stay Compliant. Stay Protected with AMCA Auditing!

Let AMCA Auditing handle your VAT deregistration and AML obligations. With years of UAE experience, we ensure every step of your liquidation meets the latest regulatory standards.

Contact AMCA Auditing today!

Call Us: +971 4 240 8784

Email Us: info@amcaauditing.com

Visit Us: https://www.amcaauditing.com/

FAQs:

Q1: What is the typical timeline for company liquidation in the UAE?

The company liquidation process in the UAE generally takes 6 to 8 weeks for mainland companies and 4 to 6 weeks for free zone entities, depending on document readiness and authority approvals. Delays can occur if VAT deregistration or final audit reports are pending. Appointing a licensed liquidator early helps expedite the process.

Q2: Can a company under liquidation still operate or issue invoices?

No, once the liquidation notice is published and the process officially begins, the company cannot issue new invoices or engage in commercial activity. It can only perform actions necessary for liquidation, such as settling liabilities or disposing of assets. Continuing operations during liquidation can lead to regulatory penalties.

Q3: What happens to employee visas and gratuity during liquidation?

Before liquidation is finalized, the company must settle all employee dues, including final salary, gratuity, and unused leave encashment. All residence visas and work permit under the company must be cancelled through MOHRE and immigration systems before the trade license can be officially terminated.

Q4: Does closing a company require VAT deregistration?

Yes, when operations cease, you must apply for deregistration with the Federal Tax Authority (FTA). The VAT registration remains active until it is formally deregistered, and failure to do so means the company remains liable for VAT returns, penalties, and audits.