- VAT Voluntary Disclosure is a form provided by the Federal Tax Authority.
- It allows taxpayers and businessmen in Dubai to notify the authorities in case of any mistake in the tax returns or refund.
- When it comes to VAT voluntary disclosure, there are two types of penalties.
Voluntary disclosure is filled in case where the taxpayer commits an error in the tax papers like tax assessment, tax returns, tax refunds, etc. The taxpayer should notify the authorities of the error as soon as he becomes aware of such omissions by submitting a voluntary disclosure.
Every error requires different considerations regarding voluntary closure. This article is helpful when there is only a ‘one-off’ error in VAT. However, in case of various errors, it may be worth-while to take professional help before making any voluntary disclosures. It will help you in making this process smooth, where all the potential questions will be addressed.
What is VAT Voluntary Disclosure?
VAT Voluntary Disclosure is a form provided by the Federal Tax Authority. It allows taxpayers and businessmen in Dubai to notify the authorities in case of any mistake in the tax returns or refund. The taxpayer provides the form attached with all the required documents to FTA for any changes to be made in the tax payable or returns.
Primary criteria for filling VAT voluntary disclosure in Dubai
The following are some of the basic criteria of filing for VAT voluntary disclosure in Dubai.
Incorrect tax report:
If the taxpayer finds out later that the tax return submitted by the FTA to him is incorrect, which then resulted in a miscalculation of the payable tax, he must file a voluntary disclosure to correct the error. The benchmark is kept at a difference of 10,000 AED, i.e., the calculation of tax payable is less than it should have been my more than 10,000 AED.
Incorrect tax refund:
If the taxpayer discovers that the tax fund application submitted to the FTA is incorrect, which resulted in calculating the refund amount being more than it should have been, he must file voluntary disclosure.
The taxpayer should also file voluntary disclosure if he finds out that his tax application is incorrect, which resulted in calculating the refund amount being less than it should have been.
If the taxpayer becomes aware that his tax return submitted by FTA to him is incorrect, which later resulted in a calculation of more tax payable than it should have been, he must file a voluntary disclosure.
It is essential that the taxpayer checks the variance if he wants correction. If the variance is less than 10,000 AED, then he can make adjustments in the subsequent period, but if the difference is more than 10,000 AED, he should submit voluntarily disclosure to make corrections.
When filing for VAT voluntary disclosure in UAE, several documents are required to be submitted along with the voluntary disclosure form to support the claim. A more relaxed approach is to hire services of companies offering the best VAT consultancy in Dubai, as they can help you in gathering documents to explain and support the details of tax errors along with a formal letter stating the reason behind filing voluntary disclosure.
* Always remember that voluntary disclosure must be filed within 20 business days of discovering the error to avoid penalties.
Penalties involved in submitting a voluntary disclosure
When it comes to VAT voluntary disclosure, there are two types of penalties. There is a fixed penalty of 3,000 AED for the first filing, and second or a repeated submission, the penalty can go up to 5,000 AED or more. The second type is called the percentage-based penalty. It is applied on the amount unpaid to the authority due to an error. It ranges from 5 percent to 50 percent.
FTA penalties are based on a percentage as follows:
- If voluntary disclosure is filed before the tax auditor before the notification from the authority, then a 5 percent tax amount is charged as a penalty, which was not disclosed before.
- If voluntary disclosure is filed after notification from the authorities, but tax audit has not been started yet, then 30 percent of the unpaid tax amount will be charged as a penalty.
- If voluntary disclosure is submitted after notification by authorities and after-tax audit, then 50 percent of unpaid tax amount will be charged as a penalty.
These are some of the primary details related to the VAT Voluntary Disclosure in Dubai. When filing voluntary disclosure in case of any error, these details will help you to do it properly.
If you still have some doubts and do not feel confident about doing it personally, you may also consider companies offering the best VAT consultancy in Dubai to undertake this process with accuracy.
Take precautionary measures as a small discrepancy in your proof would make the voluntary disclosure invalid.