Crash Course – Voluntary VAT disclosure in the UAE

basics of voluntary VAT disclosure in UAE

Crash Course – Voluntary VAT disclosure in the UAE

VAT was introduced in UAE on January 1, 2018. Since then companies must comply with many requirements to abide by the VAT laws. These requirements include VAT registration, deregistration, accounting, return filing, implementation, and other compliance requests. Voluntary disclosure is essential for companies to ensure compliance with the VAT laws.


What is voluntary disclosure in UAE for VAT?

When you submit the UAE VAT Form 201 and later realize an error or some missing entry. You can rectify those errors. This is the voluntary disclosure VAT 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 will impose a higher penalty amount.


When do you require the UAE VAT voluntary disclosure?

You need VAT voluntary disclosure in the UAE 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 being 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 you cannot correct the existing tax return, 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 the error has been discovered or you can submit a voluntary disclosure VAT 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 lower 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 of voluntary disclosure 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?

voluntary VAT disclosure procedures

To begin the voluntary VAT disclosure, you need to log into the FTA portal with your username and password to gain access to Form 211. 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; 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, and the reasons for errors. It also includes 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.

Before submitting these proofs and figures, it would be a good idea to calculate the total liability separately in the VAT Calculator. A VAT calculator is an excellent tool that facilitates your tax liability calculation and successful completion. The reason is it gives you the exact amount once you enter the necessary details.


What are the penalties in case of voluntary VAT disclosure?

Failing to comply with the voluntary VAT disclosure process, the FTA imposes two kinds of penalties – percentage-based and fixed penalties. They will impose a fixed penalty 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 will increase to AED5,000.0. Another penalty will be imposed, known as a percentage-based penalty. It applies to the amount of tax liability that you have not paid to FTA. Generally, it ranges between 5 to 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 you still have not paid, 4% is due on the seventh day following the deadline for payment. It is on the amount of tax that is still unpaid
• If you still have not paid, a 1% daily penalty is charged on any unpaid amount one calendar month following the deadline for payment with an 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.

These VAT consultants are experts and professionals who have the knowledge, expertise, and experience in handling the VAT voluntary disclosure matters in the UAE with complete dedication, efficiency, and transparency.

Crash Course – Voluntary VAT disclosure in the UAE

Our strengths – VAT consulting services

If you looking for the best VAT consultants in Dubai, who can help you with voluntary disclosure of VAT and other requirements, look no further. We are experts in everything related to UAE VAT laws. 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 at assisting clients with VAT registration, deregistration, implementation, return filing, and accounting services.


FAQs

What are the options to submit a voluntary disclosure form in UAE?

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.

Is it necessary to mention the date of identification of the error in the VAT voluntary disclosure process?

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 deadline period. If there are multiple errors and related multiple dates of identification, you must mention the date of identification of the first error.


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