Voluntary Disclosure of VAT in the UAE

July 1, 2021Dated:  | |

All You Need to Know About VAT in UAE

Voluntary Disclosure is a form provided by the Federal Tax Authority (FTA) allowing the taxpayer to notify and submit any error or omission in a Tax Assessment, Tax Return, or Tax Refund application to the FTA. The disclosure forms are available on the eService portal through which the taxpayer can both submit the forms as well as track their status of approval from the FTA.

Accordingly, the FTA issued certain regulations on the Voluntary Disclosure of the VAT (Value Added Tax) in the UAE. The form can thus be used in the cases of the following scenarios:

  • If the taxpayer becomes aware that a Tax Return submitted to the FTA or the tax assessment that the FTA had sent is incorrect, which resulted in the Payable Tax being less than it should have been (given the underpayment is more than AED 10,000)
  • If the taxpayer becomes aware that a Tax Return submitted to the FTA or the tax assessment that the FTA had sent is incorrect, which resulted in the Payable Tax being less than it should have been and there is no tax return through which the error is notified (given the underpayment is not more than AED 10,000)
  • If the taxpayer becomes aware that a tax return submitted to the FTA or a tax assessment that the FTA had sent is incorrect, which resulted in the payable tax being more than it should have been.
  • If the taxpayer becomes aware that a Tax Refund submitted to the FTA is incorrect, which resulted in the refund amount being more than it should have been.
  • If the taxpayer becomes aware that a Tax Refund submitted to the FTA is incorrect, which resulted in the refund amount being less than it should have been.

The voluntary disclosure must be made within 20 business days from the date the tax person became aware of the error.

Inorder to submit a voluntary disclosure form against a VAT Return or Refund that has been submitted to the FTA or against an Assessment sent by the FTA, go into the VAT service portal of the FTA, and to the relevant tab against which the disclosure is to be submitted. In the tab, click on ‘submit voluntary disclosure’ to notify and submit the errors.

The voluntary disclosure form for VAT returns in UAE has two sections for each section on the tax return form:

  1.    As Reported: Indicates the amounts that have been disclosed in each box in the latest tax return, Voluntary Disclosure or Tax Assessment. These amounts are pre-populated.
  2. As Current: Refers to the corrected VAT Return/Voluntary Disclosure/Tax Assessment. The final VAT amounts (total values that should have been reported) corresponding to respective tax periods.
 

A letter should be uploaded providing the background facts and a detailed description of errors (including the reasons) as disclosed in the Voluntary Disclosure form.

Upon clicking the submit button, the form would be saved and the Voluntary Disclosement/ Tax Assessment Tab would summarise the submitted Voluntary Disclosure. This include:

  1. A View Detail column that allows the user to view the form that has already been submitted
  2. Date of filing that shows the date on which the form has been submitted
  3. VAT Return Period shows the original period on which the correction is submitted
  4. Penalty Amount that shows any penalties related to a Voluntary Disclosure (if applicable)
  5. Voluntary Disclosure Reference Number which can be used as a reference for all communication with the FTA
  6. Net VAT Position which shows the tax submitted post the filing of the error correction
  7. Reported Net Payable Tax which shows the tax submitted prior to the filing of the error correction
  8. Status which shows the final status of the form as Drafted, Rejected or Acknowledged.
  9. Action includes the edit button which allows the Taxpayer to edit the form if the form was saved as a draft or if the FTA has requested more information.

There are two types of Voluntary Disclosure Penalties for VAT in the UAE levied jointly, depending upon the circumstances of the disclosure:

  1. Fixed Penalty for Voluntary Disclosure of VAT that is applicable for the usage of voluntary disclosure, regardless of it being first time (3,000 AED) or repeated(5,000 AED).
  2. Percentage-Based Penalty for Voluntary Disclosure of VAT whereby a penalty ranging from 5% to 50% is applied on the amount unpaid due to the error depending on the circumstances of the disclosure.
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