Things to know on voluntary disclosure in UAE

VAT has now become an integral part for all UAE businesses. Paying VAT to FTA (Federal Tax Authority) in UAE must be done with utmost precision and accuracy. Then you must also learn about how to rectify errors if any with VAT voluntary disclosure.

First and foremost let us learn what Voluntary Disclosure is

It is nothing but a form provided by the Federal Tax Authority. It allows businessmen and taxpayers to notify the FTA about any mistakes or changes that are to be made in a Tax return or Tax Refund.

Under what circumstances a taxpayer must use Voluntary Disclosure?

A disclosure can be filled in circumstances where the taxpayer commits an error or any omission in a Tax Return, Tax Assessment or Tax Refund application. This form 211, allows the taxpayers to make corrections while submitting VAT for which the output tax payable or input tax recoverable is more than AED 10,000/- for any given period. In simple words, if a taxpayer becomes aware that the tax return submitted to FTA is erroneous, Then a voluntary disclosure must be submitted.

What are the basic criteria for filling Voluntary Disclosure?

• If the payable tax is more than tax required to be paid that could be more than AED 10,000 then a voluntary disclosure must be filed. This should be filed within 20 business days from the date when the taxable person is aware of the error.

Check and clear the mistake in the return period in which the error is discovered. The time limit will be within the due date for filing the respective tax return.

• Next if due to the error, payable tax comes less than tax required to be paid which may be AED 10,000 or less

If there is no means to rectify the errors and if the unpaid tax liability is less than AED10,000 then voluntary disclosure should be filed within 20 business days from the date when the taxable person realised about the error.

There is no need of submitting a voluntary disclosure for unpaid tax as long as the person is able to correct the error in the tax period of the tax return itself, during which the error has been found out, also if the amount of the Payable Tax is not more than AED 10,000.

Now as we have learnt about what is VAT voluntary disclosure, we must also be aware of other details like - what the documents required to be submitted along with voluntary disclosure to support this. Most obviously all documents must be attached and uploaded to support and explain the details of the errors along with a letter that carries the facts and the reason for the need of submitting voluntary disclosure.

Are there any penalties involved while submitting voluntary disclosure? Yes, there are two types of penalties: for submitting Voluntary Disclosure for the first time, there is a fixed penalty of AED 3,000; and second or repeated submission the penalty can go up to AED 5,000 or even more.

Other than these, there is more to know about how much FTA penalises which is based on percentage. The details are shared below:

• In case of Voluntary Disclosure has been filed before the authority notifies the taxable person and before tax audit, then a 5% of the tax amount which was not disclosed earlier will be charged as penalty.

• In cases of Voluntary Disclosure being filed after the notification made by the authority for a tax audit yet it is before starting the audit, then 30% of the unpaid tax amount is charged as a penalty.

• If the Voluntary Disclosure is filed after auditing, then 50% of the unpaid tax amount is charged as penalty.

These are some fundamental details of Voluntary disclosure for VAT in UAE. So when filing Voluntary Disclosure in case of errors made in the tax return, these details will definitely aid you to do it properly and with accuracy. If you still have doubts it is best to take advice from the experts like reputed VAT Consultant in Dubai who will help you to fill them.

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