VAT Voluntary Disclosure in UAE

HLB HAMT has a team of VAT experts who will guide through the process and apply for Voluntary disclosure in the exact format and in a timely manner to avoid any chances of rejection.

We have dedicated desk of tax professionals who have submitted Voluntary Disclosures in UAE for multinational conglomerates and responded to FTA queries making the voluntary disclosure submission a cakewalk for the clients.

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    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 Tax 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.

    It is important to note that, Voluntary Disclosure submissions are subject to two types of penalties which are:

    1. Fixed Penalty for Voluntary Disclosure

      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.

    2. 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-year5%
    Second-year10%
    Third-year20%
    Fourth-year30%
    After fourth year40%

    FTA has also mandated to upload a Voluntary Disclosure letter in a particular format, which would provide the background facts and a detailed description of the error(s) disclosed in this Voluntary Disclosure Form. This letter should also indicate the reasons for the Voluntary Disclosure and the errors disclosed as well as the impact on the relevant sections/boxes of the tax return.

    The Voluntary disclosure must be made only after thorough review of any existing errors/commissions as the FTA can request for documents or supporting evidence to proceed with approval of Voluntary disclosure.

    Frequently Asked Questions – 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

    5. Fixed Penalty

      WhenPenalty amount
      First Voluntary disclosureAED 1,000
      Subsequent Voluntary DisclosuresAED 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-year5%
      Second-year10%
      Third-year20%
      Fourth-year30%
      After fourth year40%

      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.
    6. 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.

    7. 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
    8.  

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