While registration as a taxpayer under sales tax is more common, deregistration, on the other hand, occurs quite rarely, and there are only two reasons for it. Either the taxpayer’s activity has ceased or is suspended, or, having registered as a taxpayer voluntarily, the taxpayer realised that filing tax returns monthly is too much for their business volume. Either way, ceasing filing tax returns is not an option, unless deregistration is initiated, although it is subject to the same penalties as failure to file returns if deregistration is initiated incorrectly.
When Can One Deregister?
The FBR considers deregistration appropriate in any of the following cases:
- the taxpayer has permanently ceased their business activity or the business no longer supplies taxable goods/services (for instance, its turnover no longer meets the threshold for sales tax registration or its nature has changed);
- the taxpayer was registered voluntarily and wishes to deregister.
Deregistration as a taxpayer is generally unavailable to active businesses that continue to supply taxable goods/services at a level requiring them to file tax returns.
The General Procedure
It commences with submitting an application for deregistration via your IRIS profile. Specifically, navigate to the registration section, where you will find the option to apply for deregistration by providing the reason for your application. After this step, the FBR will typically undertake the following actions:
- assess your filing history and any tax liabilities, which must settle before deregistration (tax returns cannot be outstanding or unpaid);
- verify that all stock-in-hand, if any, has been declared and that tax has been paid;
- ensure that there are no outstanding audits, notices, or any other matters related to your registration;
- cancel your registration after FBR has approved your application or inquiries have been made if clarification is needed on any of the above points.
Please note that FBR’s exact navigation path within IRIS for deregistration may be changed, so it is always advisable to double-check live screen names either with us or in your IRIS software directly rather than relying on potentially out-of-date information. Eligibility criteria and general procedure, on the other hand, are unlikely to change often and are described in detail above, highlighting the points on which most applications are denied.
Continued Liability Until Deregistration is Approved
Until deregistration is approved, you are required to file tax returns for all tax periods as normal. Filing a nil return for the tax period is appropriate if no taxable supplies have been made for that period. If a tax return for the period is due, it must be filed (or a nil return submitted) for the period up to the date of deregistration, even if the deregistration request is still pending approval.
Why a Deregistration Request for Your Business Might Not be Straightforward
As the responsibility for filing returns for all periods falls on you as the taxpayer, any inconsistencies or queries (unexplained annex-A discrepancies, late filing of returns, outstanding input tax liabilities, etc.) discovered by FBR during deregistration processing may result in your deregistration application being deferred until such inconsistencies are explained and rectified. We therefore strongly advise consulting with us before deregistering to ensure no inconsistencies are present in your filing history. As for businesses contemplating deregistration (or the alternative, filing nil returns for periods with no taxable supplies), we offer expert advice on the most appropriate course of action in each case on a case-by-case basis, available via our Sales Tax services page.
FAQ
Can I deregister if I have an outstanding sales tax return?
Outstanding sales tax returns must be settled before deregistration can be approved.
Will I be deregistered automatically if my business closes?
No. You must apply for deregistration via the IRIS portal. Until then, you remain liable for filing returns even if your business is no longer operational, and failure to file returns on time will result in non-filing penalties.
If I registered voluntarily, am I allowed to deregister at any time?
While the original obligation to register voluntarily may no longer apply, you must still settle any outstanding returns or liabilities before deregistration can be approved.
