VAT Voluntary Disclosure Submission in UAE
In the UAE, the introduction of Value Added Tax (VAT) has added responsibilities for businesses and individuals, including accurate VAT return filing. Errors or omissions can occur due to the complex nature of transactions and tax regulations. To address such issues, the Federal Tax Authority (FTA) offers VAT Voluntary Disclosure. This mechanism allows taxpayers to notify the FTA of errors or omissions in a tax return, assessment, or refund application. It can also correct errors identified by the FTA during audits or refund applications. Voluntary disclosure can result from health checks, transaction reviews, past return reviews, or FTA instructions.
Ensuring Compliance
Process of VAT Voluntary Disclosure
- Taxpayers must first identify any errors or omissions in their tax-related documents.
- Using the form provided by the FTA, taxpayers prepare their Voluntary Disclosure submission. This includes details of the error or omission, the tax period in question, and the corrective action taken.
- The completed Voluntary Disclosure submission is then sent to the FTA for review and processing.
- The FTA assesses the submission and may request additional information or clarification if necessary.
- Once approved, the taxpayer makes the necessary corrections and ensures full compliance with tax regulations.
Benefits of Taxfix's Voluntary Disclosure Services
When to Use VAT Voluntary Disclosure
When can we submit a Voluntary Disclosure?
If an error(s) resulted in a payable tax difference | the Person shall… | …before… |
more than 10,000 Dirhams | make a Voluntary Disclosure to the FTA | 20 business days from the date when the Taxable Person became aware of the error |
10,000 Dirhams or less | correct the error in the Tax Return for the Tax Period in which the error has been discovered (if he is obligated to submit a Tax Return to the FTA for this Tax Period); or | the due date for the submission of the respective Tax Return |
make a Voluntary Disclosure to the FTA (if there is no Tax Return through which the error can be corrected) | within 20 business days from the date of becoming aware of the error |
Penalties on submission of Voluntary Disclosure in UAE
Fixed Penalty
For every Voluntary Disclosure submission, there will be a fixed penalty of AED 1,000 for the first Voluntary disclosure. Thereafter, AED 2,000 each for any subsequent Voluntary Disclosure submission.
Percentage – Based Penalty
VD Submitted within below specified period from the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application | Percentage based penalty on difference between the Tax that was calculated and that which should have been calculated |
| First year | 5% |
| Second year | 10% |
| Third year | 20% |
| Fourth year | 30% |
| After Fourth year | 40% |
On Late payment of difference amount
The tax difference reported as per VD must be paid within 20 business days from the submission of VD. In case of non-payment within the specified time limit then, below penalties will be levied:
- 2% of the unpaid Tax shall be due on the day following the due date of payment, where the settlement of Payable Tax is late.
- 4% monthly penalty is due after one month from the due date of payment, and on the same date monthly thereafter, on the unsettled Tax amount to date.
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What is the best time to identify the errors/omissions and submit the Voluntary Disclosure in UAE?
It is NOW.
The sooner any error or omission is identified, the sooner the correction can be made, and the lower penalties will be applicable as stated in the above table.
Below methods can be conducted to identify errors/omissions in a VAT return already submitted:
- VAT Health Check or VAT Due Diligence
- VAT Pre-Audit services
- Review of past VAT returns filed
- Transaction Analysis
VAT Voluntary Disclosure is a valuable tool for taxpayers in the UAE to rectify errors or omissions in their tax-related documents. It reflects a commitment to tax compliance, accuracy, and efficiency in the VAT system. Timely and accurate use of the Voluntary Disclosure mechanism helps taxpayers avoid penalties and legal consequences, ensuring a smoother and more reliable tax reporting process. If you have identified errors or omissions in your VAT-related documents, consider utilizing VAT Voluntary Disclosure to maintain compliance and accuracy in your tax filings.