In the dynamic realm of taxation, businesses constantly grapple with value-added tax (VAT) intricacies. Voluntary Disclosure is a beacon of transparency and integrity among the myriad compliance measures. This blog further aims to unravel the question, What is Voluntary Disclosure in VAT? Its layers of Voluntary Disclosure in VAT shed light on its significance, the circumstances that warrant its use, and the tangible benefits it bestows upon businesses to avoid any mistakes.
What is a Voluntary Disclosure?
A Voluntary Disclosure is a legal provision allowing taxpayers to report any errors or omissions made in their filed Tax Return, Tax Assessment, or Tax Refund application. This provision is issued by the Federal Tax Authority (FTA) to encourage taxpayers to come forward and disclose any discrepancies in their tax records before the FTA detects them. However, by doing so, taxpayers can avoid any penalties or legal actions that the FTA may impose if the discrepancies are discovered through an audit.
Voluntary Disclosure in VAT
FTA offers Voluntary Disclosure as a means for tax-registered individuals to rectify errors or omissions in their previously filed VAT returns. This form enables individuals to amend their tax return and ensure that their VAT liabilities are accurately reported.
What is Voluntary Disclosure (VD) in UAE?
The Federal Tax Authority (FTA) offers a Voluntary Disclosure form enabling tax-registered individuals to rectify errors or omissions in their previously filed VAT returns. This measure helps businesses ensure compliance with VAT regulations and avoid potential penalties.
What circumstances call for a VAT Voluntary Disclosure?
The Federal Tax Authority (FTA) offers a Voluntary Disclosure form enabling tax-registered individuals to rectify errors or omissions in their previously filed VAT returns. This measure helps businesses ensure compliance with VAT regulations and avoid potential penalties.
According to Article 8 of Cabinet Decision No. 36 of 2017 on the Executive Regulation of Federal Law No. (7) of 2017 on Tax Procedures, voluntary disclosures must be made in specific situations.
- In cases where a tax return or assessment is filled out inaccurately and leads to a calculation of payable tax that is lower than the required amount or when a tax due is underpaid by more than AED 10,000, corrective action must be taken.
- The tax payable calculation must be revised, resulting in underpaying tax not exceeding AED 10,000. The absence of a Tax Return limits the opportunity to rectify the error.
- If a tax refund request is filed with incorrect information, resulting in the taxpayer being owed an amount more significant than what they are entitled to, the refund will only be adjusted if a fraudulent tax return or an incorrect tax assessment did not cause the mistake.
Type of Voluntary Disclosure Penalties in UAE
The following are the Fixed Penalties for Voluntary Disclosure;
- If you’re using the VAT Voluntary Disclosure form for the first time, a fine of 3,000 AED will be levied against you.
- If you use the VAT Voluntary Disclosure form more than once, be aware that a penalty of 5,000 AED will be applied for each subsequent use.
How is Voluntary Disclosure for VAT in the UAE done?
The FTA Portal provides a form VAT 211 to submit Voluntary Disclosure. This form is available in the VAT section of the FTA Portal. Whether you are an individual or a business entity, the FTA Portal’s voluntary disclosure form will provide a reliable and efficient way of submitting your disclosure.
What are the Penalties Associated with Voluntary Disclosure of VAT in UAE?
For initial voluntary disclosures or Form 211 filings without prior notification from the Federal Tax Authority (FTA), a fixed penalty of AED 3,000 applies. Subsequent Form 211 submissions will incur a penalty of AED 5,000 per filing.
Is Voluntary Disclosure in the UAE in My Best /Interest?
Yes, for businesses operating in the UAE, making a voluntary disclosure for VAT can be highly beneficial. By disclosing voluntarily, businesses can win the trust of the Federal Tax Authority and other regulatory bodies.
In most cases, if a business discloses voluntarily, the FTA will only delve into the issue further if it has already opened a case, which means that the penalties charged to the business will be considerably lower than if the FTA initiates its investigation. More importantly, voluntary disclosure will enable businesses to get their tax affairs in order, which will give them peace of mind and help them meet all of their tax obligations.
While business owners can make a voluntary disclosure themselves, it is advisable to seek the assistance of a regulated tax agent in Dubai, who can offer guidance throughout the process. It is always recommended to have experts verify the exact amount of tax payable, as well as the penalties associated with it.
Voluntary Disclosure Experts in UAE
RFZ is a team of highly skilled and experienced professionals who specialize in providing expert Voluntary Disclosure services in the United Arab Emirates. With a deep understanding of the local regulatory landscape and a commitment to delivering exceptional client service,
Morover, RFZ is the go-to choice for individuals and businesses seeking to proactively disclose any tax or financial discrepancies to the relevant authorities. Whether you need guidance on the Voluntary Disclosure process or require representation in negotiations with tax authorities, RFZ has the expertise and knowledge to ensure a favourable outcome.
Faq’s:
Following are the Faqs:
The Federal Tax Authority (FTA) provides a form called Voluntary Disclosure, which allows taxpayers to self-report any errors or omissions in their previous Tax Returns, Tax Assessments, or Tax Refund applications. Moreover, this form is an excellent opportunity for taxpayers to rectify their mistakes before the FTA discovers them, and it helps to avoid any potential penalties or legal consequences.
If a taxable person has made an error or omission in their tax calculation, the payable tax is less than the required amount by more than AED 10,000. In that case, they are required to make a Voluntary Disclosure within a period of 20 business days from the date they become aware of such an error.
This disclosure should be made to the Federal Tax Authority (FTA) and include all the necessary details and information regarding the error or omission. It is important to note that Voluntary Disclosure is a way of correcting errors. And also avoiding penalties that may be imposed in case the tax authorities discover the error.
If you notice an error on your VAT return, it is essential to rectify it promptly. Usually, this can be accomplished by modifying the subsequent return. However, if the mistake leads to a rise in your VAT obligation, it is strongly suggested that you submit a voluntary disclosure letter. This measure will safeguard you against any penalties that may arise.
It is possible to perform various procedures to detect any mistakes or omissions in a VAT return that has been previously submitted.
- VAT Health Check or VAT Due Diligence
- VAT Pre-Audit services
- Review of past VAT returns filed
- Transaction Analysis
If you notice an error in a Tax Return that you submitted to the FTA or a Tax Assessment that was sent to you by the FTA, which led to an inaccurate calculation of Payable Tax under the Tax Law, resulting in a lower amount being paid, you must submit a Voluntary Disclosure promptly to rectify the error.
Conclusion:
Voluntary Disclosure, as provided by the Federal Tax Authority (FTA), has become a beacon of transparency and integrity. It offers tax-registered individuals an avenue to rectify errors or omissions in their previously filed VAT returns. The legal provision encourages taxpayers to voluntarily disclose discrepancies before the FTA detects them, thereby averting potential penalties and legal actions that may follow an audit.
VAT Voluntary Disclosure demystifies its role as a proactive tool for businesses seeking to rectify inadvertent errors. Ensure compliance and foster a culture of fiscal responsibility. Moreover, RFZ can help you with this journey as we solve the nuances of Voluntary Disclosure. We pave the way for a clearer understanding of its application and impact in the ever-evolving landscape of VAT.
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