VAT Voluntary Disclosure Form in UAE

Businesses in the United Arab Emirates (UAE) can utilise the VAT Voluntary Disclosure Form (Form VAT 211) to rectify errors or omissions made in past VAT return filings, tax assessments, or refund applications. This approach allows businesses to disclose mistakes to the Federal Tax Authority (FTA) and potentially benefit from reduced penalties compared to facing penalties if the FTA discovers the errors during an audit. This article delves deeper into the VAT voluntary disclosure form and how to submit it.

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What is the VAT Voluntary Disclosure Form?

A VAT Voluntary Disclosure form in the UAE (Form VAT 211) is a document submitted electronically through the Federal Tax Authority's (FTA) portal to inform them of errors or omissions made in previous VAT return filings, tax assessments, or refund applications. By proactively disclosing these mistakes, businesses can benefit from reduced penalties and avoid legal complications compared to having the FTA discover the errors during an audit.

Benefits of VAT Voluntary Disclosure Form

The VAT voluntary disclosure form (Form 211) offered by the Federal Tax Authority (FTA) in the UAE provides several advantages for businesses:

• Corrects Errors and Omissions: The primary benefit is the ability to rectify mistakes made in previous VAT return filings, tax assessments, or refund applications. This can involve underpayment or overpayment of taxes.

• Reduced Penalties: By proactively disclosing errors through the voluntary disclosure form, businesses can potentially qualify for reduced penalties compared to what the FTA might impose if they discover the mistake themselves.

• Maintains FTA's Regulations: Voluntary disclosure demonstrates a commitment to complying with the FTA's regulations. This can help businesses avoid any potential penalties or legal complications arising from discovered errors.

• Avoids Heavier Penalties: Voluntary disclosure is preferable to waiting for the FTA to identify the mistake. The FTA may levy stricter penalties and even prosecutions in cases of non-voluntary disclosure.

When to submit the Voluntary Disclosure Form?

There are two main scenarios where you should submit a Voluntary Disclosure Form (Form VAT 211) to the Federal Tax Authority (FTA) in the UAE:

1. Understatement of Payable Tax: If you discover an error in a previously submitted tax return or tax assessment that resulted in you underpaying your VAT liability (payable tax is less than it should be), you must submit a Voluntary Disclosure to rectify the error. Important Note: This requirement applies regardless of the amount if the error is discovered after March 1, 2023. Previously, there was a threshold of AED 10,000 for mandatory disclosure.

2. Overstated Tax Refund: If you realize a mistake in a tax refund application that led to you claiming a larger refund than you were entitled to, you must submit a Voluntary Disclosure to correct the error.

Optional Disclosure:

The Voluntary Disclosure process can also be used voluntarily, even if the error resulted in an overstated payable tax or an understated tax refund (amounts you owe the FTA are higher or the refund you receive is lower than they should be). This can be a strategic decision to potentially benefit from reduced penalties compared to having the FTA identify the error during an audit.

Timelines for Voluntary Disclosures

The time limit for submitting a VAT Voluntary Disclosure in the UAE depends on the amount of understated tax and a relevant tax return for correction.

• For errors exceeding AED 10,000: Businesses must disclose the error to the FTA within 20 business days from the date they became aware of it.

• For errors of AED 10,000 or less: If a tax return can be used to rectify the error (e.g., for the same tax period), the correction should be made in that return. However, if there's no applicable return for correction, a Voluntary Disclosure must still be submitted to the FTA within 20 business days of discovering the error.

How to Submit the VAT Voluntary Disclosures in FTA?

The process for submitting a VAT Voluntary Disclosure in the UAE involves the following steps:

1. Identify the Error: Carefully review your VAT filings to identify any errors or omissions.

2. Calculate the Impact: Quantify the impact of the error, including any additional tax payable or refundable input tax.

3. Prepare Supporting Documentation: Gather all relevant documents that support the error and its rectification. This may include invoices, receipts, contracts, and accounting records.

4. Access the FTA Portal: Log in to the FTA's online portal, "EmaraTax," using your UAE Pass credentials.

5. Navigate to the Voluntary Disclosure Section: Locate the "Voluntary Disclosure" section within the VAT module.

6. Initiate the  Voluntary Disclosure   Process: Follow the on-screen instructions to initiate the Voluntary Disclosure process. The system will guide you through entering details of the error, uploading supporting documents, and calculating the additional tax payable (if any).

7. Submit the  Voluntary Disclosure: Once all information is entered and verified, submit the Voluntary Disclosure electronically.

8. Payment of Additional Tax: If the disclosure reveals additional tax payable, businesses must settle the outstanding amount within the specified timeframe.

Examples of VAT Errors Requiring Voluntary Disclosure

Here are some common scenarios where a VAT Voluntary Disclosure might be necessary:

• Classification Errors: Incorrectly classifying a taxable supply as exempt, zero-rated, or non-taxable. (e.g., Applying a 0% VAT rate to a service that is actually subject to 5% VAT).

• Calculation Mistakes: Miscalculating the amount of input tax claimed or output tax payable. (e.g., Applying the wrong VAT rate on an invoice).

• Missing VAT Invoices: Failing to include invoices for claimable input tax in your VAT return.

• Accounting Errors: Errors in accounting records leading to discrepancies in VAT calculations. (e.g., Recording an expense related to a non-taxable supply as a claimable input tax).

• Changes in Business Activities: Failure to update VAT registration details to reflect changes in business activities that might impact VAT liability. (e.g., Starting to make exempt supplies that were previously taxable).

Deadlines for Submitting a VAT Voluntary Disclosure

There is no specific deadline for submitting a VAT Voluntary Disclosure in the UAE. However, it is highly recommended that errors be disclosed as soon as they are identified. The sooner the disclosure, the greater the potential benefit of reduced penalties.

Conclusion

In conclusion, the VAT Voluntary Disclosure Form (Form VAT 211) offers businesses in the UAE a chance to rectify past VAT filing mistakes. By proactively disclosing errors to the Federal Tax Authority (FTA), businesses can potentially secure reduced penalties compared to waiting for an FTA audit. While there's no strict deadline, early disclosure is advisable to maximize potential benefits. Remember, the FTA portal guides you through the submission process, making rectifying errors easier and ensuring VAT compliance.

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