An image depicting about a need to keep filling nil return or liable for deregistration in UAE Tax VAT

Nil Returns vs. Deregistration: Guide for Inactive Companies

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Determining whether to file nil returns or pursue deregistration for an inactive company can be confusing. This decision requires assessing your business’ situation and complying with regulations.

This comprehensive guide examines both options in simple terms. Key factors indicating which approach is best will be explained through examples. By the end, you’ll understand the processes involved and be able to make an informed choice.

Nil returns fulfill compliance during certain phases. Let’s explore three common scenarios in detail:

Startup Phase

New companies take time finalising permits and finding clients. Submitting nil returns proves to authorities you are formally operational even without revenue yet. This allows focusing on launch preparations without jeopardising your registration.

Temporary Slowdown

Seasonal or project-based firms experience intermittent work gaps. One month a contractor has five projects, the next none. By filing nil returns through slow periods, the contractor retains valid operations status for bidding on upcoming work.

Gradual Winding Down

Organizations downsizing incrementally over years prefer submitting nil forms rather than full deregistration. Deregistration requires audits, settling all financials and notifying everyone. Nil returns are simpler and maintain records until you complete dissolution tasks.

All companies must submit annual compliance filings under business laws. Missing returns risks fines accumulating from 100AED First time and 2000AED in case of repetition. Submitting nil returns fulfills this duty without penalties while keeping your registration active for potential needs down the road like tenders requiring evidence of ongoing activities.

When Is Deregistration Suitable?

Let’s now explore scenarios better resolved through full deregistration:

Prolonged Inactivity

If over a year passes without any realistic activity plans, continued nil submissions serve no purpose. Deregistration acknowledges the company is permanently non-operational and saves future compliance fees.

Severe Lack of Viability

For doomed startups with zero hope of success after tireless efforts, deregistration prevents throwing good money after bad on needless annual filings. It brings closure to failed ventures.

Transformed Business Plans

Perhaps you decided to pivot strategy so drastically that the original company concept is obsolete.

Deregistration vs Voluntary Liquidation

Deregistration solely eliminates company records upon wrapping up. Voluntary liquidation necessitates liquidators’ appointment, settling all assets/debts through courts and creditor notifications – meaning greater complexity. Deregistration suffices in most non-viability cases.

Complying with Liquidation Requirements

If pursuing deregistration after a company becomes permanently insolvent or non-viable, applicable liquidation procedures must be followed as per the laws of the relevant business jurisdiction. Let’s explore the typical liquidation process in more detail:

Appointing Liquidators

Liquidators are professionals authorized to oversee an orderly winding down of operations. They maintain records of sale proceeds and creditor repayments under court supervision. Select liquidators familiar with your industry who can maximize asset recovery.

Informing Creditors and Suppliers

By law, liquidators must notify all those the company owes money to about entering liquidation. This includes employees, landlords, lenders, vendors and tax authorities. Creditors are invited to submit claims against the company within deadlines.

Collecting Outstanding Receivables

Liquidators work to recover any invoices, loans or other funds still due from customers and debtors. Outstanding payments are retrieved to increase funds for creditors where possible. Legal action may be pursued for long overdue amounts if prudent.

Selling Off Company Assets

Tangible assets like equipment, inventory, vehicles and property are appraised and marketed for sale to bring in liquidity. Businesses may organize asset auctions with auctioneers advertising sale listings widely. Assets are transferred to new owners upon receipt of sale proceeds.

Settling Creditor Claims

Once the claims deadline passes, liquidators analyze submitted amounts against available records to validate debts. Approved claims are paid according to preference schedules in bankruptcy laws – secured debts first, then unsecured, preferential and lastly shareholder loans if resources remain.

Completing Final Tax Compliance

Prior to dissolution, any pending tax returns must be filed and taxes/penalties cleared. Liquidators request clearance letters from tax authorities once tax conformity is complete. These confirm taxes were settled as obligations of the business and not individual shareholders or directors.

Striking the Company from Registers

Finally, supporting documents proving assets realization and creditor payments are filed with regulatory bodies to remove the company completely from commercial registers and databases. Liquidation concludes the legal entity’s existence.

Following these standardized steps ensures a compliant shutdown through liquidation. With guidance from experienced liquidators, the process need not be onerous. Their expertise helps maximize value recovery for creditors in an organized winding down of affairs.

Seeking Professional Guidance

While deregistration guidelines are broadly uniform, liquidation obligations may differ across industry sectors and regions. Therefore, obtaining guidance specific to each company’s circumstances from licensed service providers is highly recommended.

consultants can analyze situations objectively and suggest the best route forward – whether continued compliance, deregistration or full liquidation and closure. They understand how to interpret and fulfill all legal requirements to avoid penalties from non-adherence to processes.

Most importantly, professional advisors provide peace of mind that dissolution responsibilities are properly completed to the letter of applicable statutes and policies. They take the burden off entrepreneurs’ shoulders during what can otherwise seem an overwhelming closure experience.

By tapping into credentials, networks and specialized knowledge that consultants offer, business owners gain assurance responsibilities are exactly fulfilled – allowing full focus on next ventures knowing past accounts are fully squared away and closed. This definitive ending provides the fresh start needed to move forward confidently.


In summary, file nil returns during temporary lulls but opt for deregistration if over a year passes with confirmed non-activity and no plans to restart, severe unsalvageable problems surfaced or strategies transformed completely. Consult experts based on your specific circumstances.


What if an inactive company isn’t deregistered?

Fines and future bans from non-compliance could occur.

How does deregistration differ from license cancellation?

 Deregistration deletes the entire company record versus just ending new operations with license cancellation.

What taxes must be paid pre- or post-deregistration?

Clear all pending dues, conduct final audits and settle any liabilities before applying. Deregistration does not waive prior tax debts.

What is a Nil Return?

A Nil Return refers to filing a tax return even when there is no tax payable or income to report for the period.

For which taxes should Nil Returns be filed?

Common ones are GST/VAT, income tax. Nil returns may also be required for other regulatory compliances.



Ms. Vibha Modi, CA, is supported by 13+ Years of Corporate Tax, International Taxation and Accounting Expertise.

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