Non-disclosure of Import of Services & Voluntary Disclosure – UAE VAT

Background/Fact of the Case

• XYZ LLC (Hereinafter referred to as “The Company”) is a UAE mainland entity that is engaged in the activity of consultancy.
• The company is registered with the FTA with effect from January 2018.
• The company imported a service and received an invoice from an overseas supplier who is not registered for VAT in UAE for the purchase of online software.
• The value of the invoice was USD 500,000 dated 1st January 2021.
• The purpose of the software purchase is to provide easy/flexible consultancy services to their clients in UAE.
• The accountant of the company missed to disclose the above invoice in the relevant VAT return as import of service.
• While doing the reconciliation after 6 months, the accountant noticed the above-mentioned error.

Clarification Sought

• How to report the value of imported services of USD 500,000 that was not disclosed in the relevant VAT return?
• Since two tax periods have already passed from the receipt date of the invoice, whether a voluntary disclosure is required to correct the error even if the net VAT liability resulting from the transaction is NIL?

Basis of Opinion

• Article 1 of the Tax procedures Law
• Article 10 (1) of the Tax procedures Law
• Article 8 (2)(a) of the Tax procedures Executive Regulations
• Article 54 (1)(a) of the VAT Decree-Law

Applicability

Applicable to the tax registrants who omitted to disclose the import of services in the VAT return.

Application of the Law

A Taxable person is required to correct an error that results in a calculation of payable tax being less than AED 10,000 in the VAT return covering the period in which the error was discovered.

If the company uses the services to make wholly taxable supplies, and the related VAT is fully recoverable, the value of the error would be nil as the VAT Amount to be reported in respect of output tax and input tax would be the same. In such a scenario, the value of the error is less than AED 10,000 and the company can correct the error in the VAT return covering the tax period in which the error was discovered.

Since the tax impact resulting from the error is less than AED 10,000 the company is NOT required to submit the voluntary disclosure.

Solution

Based on the above explanations, the company is eligible to correct the mistake in the VAT return period in which the error was discovered.

Any questions or queries on this, please revert to tax@hlbhamt.com

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