How to Correct VAT Errors and Make Adjustments in UAE

Voluntary Disclosure UAE VAT Meaning

If you are wondering, how to correct your filed VAT return, make adjustments, VAT Assessment or VAT refund to correct error or omission, here is the complete solution for this issue. Federal Tax Authority (FTA) introduced Voluntary Disclosure Form 211 to correct errors or omission committed in filed VAT return form 201. Now question arise that in which scenarios Voluntary Disclosure Form need to submit and what cautions need be taken while submitting Voluntary Disclosure Form? So in following 2 scenarios Voluntary Disclosure Form 211 need to submit:

1. If Net Amount impact of VAT payable or recoverable is more than AED 10,000

If taxable person become aware that VAT return submitted to FTA or VAT assessment received from FTA is incorrect and if VAT paid less actual VAT payable is higher than AED 10,000 or VAT claimed less actual VAT claimable is higher than AED 10,000 then in that case Voluntary Disclosure Form need to be submitted within 20 business days from the date when the taxable person became aware of the error. For example: Company had filed VAT return Form 211 for the quarter Jan to Mar 2019 by declaring taxable sales as AED 150,000 and VAT paid AED 7,500. Later on 30th April 2019 they become aware that actual taxable sales are AED 400,000 and VAT payable is AED 20,000. It means VAT less paid by AED 12,500. In that case concern company has to submit Voluntary Disclosure Form to FTA by 20th May 2019 about the error/omission.

2. If VAT Refund Claimed Incorrectly

If taxable person / business become aware that VAT refund form 311 submitted to FTA is not correct, then taxable person must submit Voluntary Disclosure to correct such type of errors.

When Voluntary Disclosure Form not Required to Submit?

As explained above, the Voluntary Disclosure Form needs to submit only if net impact of VAT payable and recoverable is more than AED 10,000. In the rest of the cases where the VAT amount payable or recoverable is less than AED 10,000 Voluntary Disclosure Form need not to submit. Taxable person can correct such error or omission in subsequent VAT return in which taxable person became aware of error or omission

Penalties Associated with Voluntary Disclosure Form 211 in UAE

It is very important for taxable persons to take a note that fixed penalties and percentage wise penalties will be levied by federal tax authority on accepting Voluntary Disclosure Form 211. Also check 5 tips to avoid VAT penalties in UAE

Fixed Penalty	First Time AED 3,000 and on every repeated submission of Voluntary Disclosure AED 5,000
Percentage Based Penalty	If taxable person submits Voluntary disclosure before get notified by federal tax authority (through tax audit or tax assessment)-5% of the tax amount which was not disclosed earlier If taxable person submits Voluntary disclosure after the federal tax authority notifies for a tax audit but before initiating the tax audit - 30% of the unpaid tax amount as a penalty If taxable person submits Voluntary disclosure during a tax audit performed by federal tax authority - 50% of the unpaid tax amount
VAT Late Payment Penalty	Apart from the above penalties VAT late payment penalty will be applied on unpaid VAT amount which are as follow: If taxable person not paid due VAT amount as per the VAT return by 28th of the month following the end of the tax period – 2% of the unpaid VAT amount. If VAT amount still remains unpaid on the seventh day after due date – additional 4% of the unpaid VAT amount. If VAT amount not paid even after one calendar month from due date of payment – additional 1% daily of unpaid VAT amount, it will continue up 300% of unpaid VAT amount.

How Taxable Person / Business can Avoid Voluntary Disclosure Penalties?

Taxable person / VAT registrant can avoid VAT penalties by following below advice:

• Timely and correct submission of VAT refund and returns.
• By using FTA accredited Tax Accounting Software.
• Timely accounting and bookkeeping of financial transaction as per UAE VAT law.
• By hiring Tax Professional to review and submit the VAT return.

This blog post is written by Mr. Dilip (Tax Adviser) at Flyingcolour Business Setup, Accounting & VAT Services in Dubai and UAE. Feel free to call our Tax Advisor today for a quality consultation relating your VAT related queries like VAT Health Check. Please send inquiry to info@flyingcolour.com or or call +971 4 4542366.