Wrong VAT Return in UAE

An Overview of Wrong VAT Return

According to the FTA, a taxable person commits a wrong VAT return or VAT error when he or she fails to account for the proper amount of output VAT or recovers incorrect input VAT. This is true regardless of whether a taxpayer has contributed too much or too little tax to the FTA.

Voluntary Disclosure Form

A voluntary disclosure is a form that a taxpayer uses to notify the FTA of a mistake or missing part of their tax return, evaluation, or refund request. If the error reflected in a computation of due tax that is less than the necessary amount by more than AED 10,000, the taxable person must make a voluntary disclosure form inside 20 working days of becoming learned of the fault.

To guarantee that the procedure and the voluntary disclosure are accurate, it is preferable to get assistance from registered tax agents like HLB HAMT. They may also help you with any further supporting documents that the FTA requests.

How to resolve a wrong VAT return in UAE?

To determine the strategy to rectify the VAT problem, a taxpayer must first determine how much of an impact the wrong VAT return produces.

• If the error is worth less than AED 10,000, then correct it using the VAT return for the period in which it was found.
• If the amount of the error exceeds AED 10,000, then make a voluntary disclosure to the FTA inside 20 working days of becoming notified of the mistake.

Frequently Asked Questions – Wrong VAT Return

1. What is meant by wrong VAT return in UAE?

   When a taxpayer fails to account for or recover the right amount of output and input VAT, he or she makes a wrong VAT return.

2. What is Voluntary Disclosure (VD) in the United Arab Emirates?

   A voluntary disclosure is a form issued by the FTA that allows a tax registered person to correct a mistake in a previously filed VAT return.

3. Could there be a consequence for submitting a voluntary disclosure in the UAE? 

   Yes, according to Cabinet Decision No. 49 of 2021, there are administrative consequences for filing a voluntary disclosure.On Submission of Voluntary DisclosureTwo types of penalties will be levied:

   1. A fixed penalty of AED 1,000 for the first Voluntary Disclosure and AED 2,000 for each subsequent Voluntary Disclosures.
   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 – year	5%
   Second – year	10%
   Third – year	20%
   Fourth – year	30%
   After the 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:

   1. 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.
   2. 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.

4. How do you detect the wrong VAT return or VAT errors?

   To find wrong vat returns or vat errors that have already been submitted, use the following methods:

   1. VAT Due Diligence or VAT Health Check
   2. Services for VAT Pre-Audit
   3. Examining previously filed VAT returns
   4. Analysis of Transactions

5. When is the ideal time to discover the wrong VAT return and submit VD in UAE?

   The faster an error or omission is discovered, then immediately it can be corrected, and the lesser the fines will be.

6. What is the deadline for submitting a VAT Voluntary Disclosure?

   Within 20 working days of being notified of the anomaly, the taxable person must submit a voluntary disclosure.

7. Why should companies seek assistance from HLB HAMT for wrong VAT return services?

   Businesses must choose the finest VAT consultation services in Dubai, UAE based on several factors, including the tax consultant’s expertise in VAT registration, VAT refunds, and VAT return filing.