What is Voluntary Disclosure under UAE VAT Law?

What is Voluntary Disclosure?

If a taxpayer makes an error or omission in a Tax Return, Tax Assessment or Tax Refund application Voluntary Disclosure can be filled. The Federal Tax Authority (FTA) has introduced a VAT voluntary disclosure form 211. It helps the taxable persons to rectify the errors committed while filing their UAE VAT return.

When can taxable person submit Voluntary Disclosure?

If taxable person is aware that a Tax Return submitted to the FTA has errors is incorrect then a Voluntary Disclosure Form can be submitted.

If taxable person become aware that a Tax refund application submitted to the FTA is incorrect, which resulted in calculating the refund amount to which you are entitled according to the Tax Law, being more than it should have been, then Voluntary Disclosure must be submitted to correct such error.

Is it compulsory to submit Voluntary Disclosure if errors are made while filing Tax Returns?

Yes, it is compulsory to submit Voluntary Disclosure, however under two conditions Voluntary Disclosure can be avoided.

1. If the difference in amount of tax paid and should have been paid is not more than AED 10,000 and
2. If taxable person can correct the error during the period of filing tax returns.

What are the criteria to submit Voluntary Disclosure?

1. If due to the error, payable tax is more than tax required to be paid (which could be more than AED 10,000) then voluntary disclosure must be filed. The voluntary disclosure should be filed within 20 business days from the date when the taxable person become aware of the error.
2. If due to the error, payable tax is less than tax required to be paid (which could be AED 10,000 or less)

• Correct the error in the return period in which error is discovered. Time limit will be within the due date for filing the respective tax return.
• If there is no means through which errors can be rectified and the unpaid tax liability if less than AED10,000 then voluntary disclosure should be filed within 20 business days from the date when the taxable person realised about the error.

What are the supporting documents required to submit Voluntary Disclosure?

Along with voluntary declaration a letter needs to be filed which should be explanatory of facts and details of errors. It is also important to mention the reasons because of which Voluntary Disclosures has been submitted. Supporting documents should be uploaded in this section along with mentioned letter.         

Are there any penalties for submitting Voluntary Disclosure?

There are 2 types of penalties for submitting Voluntary Disclosure.

1. A fixed penalty of AED 3,000 is applied for submitting Voluntary Disclosure for the first time.
2. Repeated submission of voluntary disclosure could cost a penalty of AED 5,000 or more.

Nevertheless, the FTA also penalises based on percentages as showcased below –

• If Voluntary Disclosure is filed before the authority notifies to taxable person and before any tax audit, then a 5% of the tax amount which was not disclosed earlier is charged as penalty.
• If Voluntary Disclosure is filed after the authority notifies for a tax audit but before starting the tax audit, then 30% of the unpaid tax amount is charged as a penalty.
• If Voluntary Disclosure is filed after start of tax audit, then 50% of the unpaid tax amount is charged as penalty.

For any VAT related query please speak to our VAT and Tax Return experts. Call us on +971508912062.