VAT Voluntary Disclosure in UAE

What is VAT Voluntary Disclosure Submission in UAE?

A voluntary disclosure is a form by which the taxpayer notifies the FTA of an error or omission in a VAT return, Assessment or Refund application. Where the error or omission resulted in a calculation of payable tax being less than required by more than AED 10,000, then a Voluntary Disclosure shall be made within 20 business days from the date the taxable person becomes aware of the error.

A voluntary disclosure submission can be a result of independent health check carried out by the tax registrant, any review related to any transaction scenario, review of past returns filed or any changes to be made based on instruction by FTA during review of refund application.

Voluntary Disclosure submissions can be done using form VAT 211 in the FTA Portal. This form can be accessed in the FTA Portal under VAT section, as shown below.

What circumstances call for a VAT Voluntary Disclosure?

Voluntary disclosures must be given in the following circumstances, as per Article 8 of Cabinet Decision No. 36 of 2017 on the Executive Regulation of Federal Law No. (7) of 2017 on Tax Procedures:

• When an incorrectly completed tax return or tax assessment results in a computation of the payable tax that is less than what is necessary, or when a tax due is underpaid by an amount exceeding AED 10,000;
• The computation of the Payable Tax is inaccurate, ending in an underpayment of tax by not exceeding AED 10,000, and there is no Tax Return available via which the error may be addressed;
• When a tax refund request is submitted incorrectly and the refund to which the taxpayer is owed is calculated to be more than the right amount, except if the mistake was caused by a false tax return or inaccurate tax assessment.

Type of Voluntary Disclosure Penalties in UAE

Fixed Penalty for Voluntary Disclosure

• A penalty of 3,000 AED will be imposed if the taxpayer utilizes the VAT Voluntary Disclosure form for the very first time.
• A penalty of 5,000 AED will be charged for each repetition, if the VAT Voluntary Disclosure form is used.

Percentage-Based Penalty on Voluntary Disclosure

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
First-year	5%
Second-year	10%
Third-year	20%
Fourth-year	30%
After fourth year	40%

• The penalty is 5% of the amount of the previous unpaid tax if the taxable person has made a voluntary disclosure before the authorities inform them
• The taxable person must pay a penalty equal to 30% of the unpaid tax amount in the event that he makes a voluntary disclosure after the tax audit has been notified but prior to the audit’s commencement.
• If the taxpayer receives notice of a tax audit and decides to voluntarily disclose information using the VAT Voluntary Disclosure Form, he will indeed be responsible for paying 50% of the outstanding tax amount.

How can HLB HAMT assist in VAT voluntary disclosure UAE?

Our team of tax specialists will assist you with the VAT voluntary disclosure procedure since HLB HAMT is a market leader in the area of value-added tax services in the United Arab Emirates.

Before making any voluntary disclosures, it could be beneficial to seek expert assistance from an authorized tax consultant in order to assess and deal with any possible repercussions. The VAT Voluntary Disclosure form necessitates thorough assessment and there are numerous aspects that ought to be considered in compliance with FTA law.

Avoid worrying and let HLB HAMT manage your VAT voluntary disclosure if you have made any errors in processing your VAT.

HLB HAMT is a certified VAT consulting organization situated in Dubai that offers complete accounting and auditing services. We offer a wide range of VAT services, including tax advisory services, VAT implementation services, filing VAT returns, and reviewing VAT compliance, among many others.

For a free consultation, contact us right now.

Frequently Asked Questions – VAT Voluntary Disclosure

1. What is Voluntary Disclosure (VD) in UAE?

   Voluntary Disclosure is a form provided by FTA using which the tax registered person can amend the previously filed VAT return due to error or omission in the tax return.

   It can also be used to correct any error or omission identified by FTA during audit and communicated the same error or omission by Tax Assessment order. After filing of refund application, if any correction is required, that can be done through a Voluntary Disclosure submission.

2. When can we submit a Voluntary Disclosure?

   • Tax Return submitted to the FTA, or a Tax Assessment sent by the FTA is incorrect, which resulted a difference in calculation of the Payable Tax according to the Tax Law by AED 10,000
   • Tax refund application submitted to the FTA is incorrect, which resulted in calculating the difference of AED 10,000 in the refund amount according to the Tax Law

   For e.g., M/s XYZ LLC filed return for the tax period December 2021. They declared AED 1,000,000 standard rated sales with Output VAT of AED 50,000. Later on, it was identified that actual standard-rated sales for the period December 2021 is AED 1,500,000 with Output VAT of AED 75,000.

   So, XYZ LLC underreported the standard rated sales by AED 500,000 and the Output tax by AED 25,000. To rectify this and update the previously submitted return for the tax period December 2021, XYZ LLC must notify FTA about the error/omission using the Voluntary Disclosure mechanism.

3. Is there any penalty on submission of Voluntary Disclosure in UAE?

   Yes, there are administrative penalties on submission of Voluntary Disclosure as revised by the Cabinet Decision no. 49 of 2021.

4. What are the penalties on submission of Voluntary Disclosure in UAE?

   On Submission of Voluntary Disclosure

   Fixed Penalty

   When	Penalty amount
   First Voluntary disclosure	AED 1,000
   Subsequent Voluntary Disclosures	AED 2,000 for each 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
   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.

5. What is the best time to identify the errors/omissions and submit VD 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.

   For e.g., The Voluntary Disclosure is relating to a tax return submitted on July 28, 2019, and the resulting difference is AED 50,000. If the VD submitted within first year i.e., before July 28, 2020; 5% penalty will be AED 2,500.

   If VD submitted within second year i.e., before July 28, 2021, penalty shall be 10% which is AED 5,000. This penalty can go upto AED 20,000 depending on the year when we are correcting the errors.

6. How can the errors/omissions be identified?

   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