VAT was introduced in UAE on January 1, 2018. Since that time, companies have been required to comply with a myriad of requirements to abide by the VAT law. Some of these requirements include VAT registration, deregistration, accounting, return filing, implementation, and many other compliance requests. VAT voluntary disclosure is one such requirement that companies must follow to remain compliant with VAT laws.
What is voluntary disclosure in UAE for VAT?
When you as a taxable person submit the UAE VAT Form 201 and later realize an error or some missing entry, you can rectify those errors. This is the voluntary VAT disclosure process. The FTA gives the option to taxable persons to voluntarily disclose the errors or omissions through submission of Form 211 before any notification from the authority regarding the same. The taxable person has the option to resolve the errors after FTA brings it to their notice; however, in such cases, they are imposed a higher penalty amount.
When is the UAE VAT voluntary disclosure required?
VAT voluntary disclosure in UAE is required in the following cases:
- When you submit an incorrect tax return to the FTA or FTA submits an incorrect tax assessment to you that results in the calculation of the tax payable as lesser than the actual amount, in this case, you must submit a VDF for error correction
- When you submit an incorrect tax refund application, that results in the calculation of the entitled refund amount as more than the actual amount, in this case, you must submit a VDF for error correction
- If there is no other tax return through which the existing tax return error can be corrected, then you must submit a VDF to correct the error
Voluntary Disclosure is required to be filed if an error(s) that resulted in the calculation of the Payable Tax being less than required is more than AED10,000. When you realize the error or omission, you must submit the voluntary disclosure within 20 business days of the realization to avoid huge penalties. If the tax liability is underpaid by less than AED10,000.0, you can correct the error in the Tax Return for the tax period in which error has been discovered or you can submit voluntary VAT disclosure if there would be no other tax return submitted.
What are the benefits of voluntary VAT disclosure?
- The key benefit of voluntary disclosure is a lesser penalty amount. When you make an error in tax calculations and proactively notify the authority and make the rectifications subsequently, you are penalized a lesser amount than the penalty you have to pay in case of detection of the error by FTA.
- You will have a good standing and reputation in the eyes of the FTA and other government regulators if you choose to correct the tax errors or omissions by yourself.
- FTA conducts investigations for wrong taxes paid; with voluntary disclosures, the severity and depth of the investigations will go down.
- Another key benefit that is often overlooked is the peace of mind that you can get after you have accurately paid all your tax liabilities and can focus better on your business.
What is the procedure for voluntary VAT disclosure?
You are required to log into the FTA portal with your username and password to gain access to Form 211. In the form displayed on the portal will be the original figures as reported by you initially. Now, you can edit the figures as per the error or feed in the missing figures along with mentioning the reason for the discrepancy. The ‘As Reported’ figures are pre-populated; you must change the ‘As Current’ figures as per the total figures for that period. If there is no error in a particular figure, the ‘As Reported’ and ‘As Current’ for that figure will remain the same.
You must submit all the relevant documents that prove the trueness of the figures you just added. In addition, you must submit a letter that describes all the errors in detail, the correct figures, the reasons for errors, and the proofs for the correct figures. The changes in figures bring an automatic change in the total tax liability amount. You must also mention the difference in the total tax liability amount because of the voluntary VAT disclosure.
Prior to submitting these proofs and figures, it is a good practice to calculate the total liability separately in the VAT Calculator. VAT calculator is a good resource that facilitates your tax liability calculation and successful completion, as it gives you the exact amount by feeding in the necessary details.
What are the penalties in case of voluntary VAT disclosure?
FTA imposes two kinds of penalties – percentage-based and fixed penalty. A fixed penalty is imposed for every offense you make in VAT liability amounts; for a first-time offense, the penalty amount is AED3,000.0 while for every subsequent offense, the amount is increased to AED5,000.0. Another penalty is imposed, called a percentage-based penalty, which is applied on the amount of tax liability that is left unpaid by the taxable person to FTA. Generally, it ranges from 5-50%.
In addition to these two penalties, the FTA imposes late payment penalties in case of unpaid liability after filling VDF:
The Taxable Person shall be obligated to pay a late payment penalty consisting of:
• 2% of the unpaid tax is due immediately once the payment of Payable Tax is late
• If the payment is still not done, 4% is due on the seventh day following the deadline for payment, on the amount of tax which is still unpaid
• If the payment is still not done, 1% daily penalty is charged on any amount that is still unpaid one calendar month following the deadline for payment with upper ceiling of 300%.
How VAT consultants in Dubai can help?
Above are the steps and checklist that you should follow to rectify your tax liability errors. If you still are unsure of the steps or dread an error or omission, you must consult VAT consultants in Dubai. VAT consultants are experts and professionals who have the knowledge, expertise, and experience in handling the VAT voluntary disclosure in UAE efficiently.
Our strengths – VAT consulting services
If you looking for the best VAT consultants in Dubai, who can help you with voluntary VAT disclosure and other requirements of VAT, NR Doshi & Partners can be a good choice. We are experts in everything related to UAE VAT laws and therefore, we can help you by providing result-oriented advisory services to make your business compliant with every VAT requirement. Our VAT consultants are adept in assisting clients with VAT registration, deregistration, implementation, return filing, and accounting services.
You have three options. You can submit voluntary disclosure for VAT against a VAT return or against a refund request that you have already submitted to the FTA or against a tax assessment that you have received from the FTA .
Yes, it is compulsory to mention the date on which you identified the error since you are expected to submit voluntary disclosure before the 20-business day’s deadline period. If there are multiple errors and related multiple dates of identification, you must mention the date of identification of the first error.