FTA publishes guide on voluntary disclosures for VAT and Excise Tax
The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published a new Voluntary Disclosure User Guide. This follows the implementation of the voluntary disclosure feature on the FTA’s eServices portal in June. The guide provides an overview of the process of completing the voluntary disclosure form for Value Added Tax (VAT) and Excise Tax, and submitting it to the FTA.
While certainly helpful, it is important to note that the Guide deals primarily with the situation where there is a ‘one-off’ error in a VAT Return. As errors requiring consideration of whether to undertake a Voluntary Disclosure can take a variety of forms, it may well be worth-while obtaining professional advice prior to making any Voluntary Disclosures, so that the potential flow on consequences can be considered and addressed.
When should a voluntary disclosure be made?
A voluntary disclosure should be made by a taxable person to notify the FTA of an error or omission in their tax return, tax assessment, or tax refund application. As per 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 are required to be made in the following cases:
- where a filed Tax Return or a Tax Assessment is incorrect resulting in a calculation of the Payable Tax being less than required i.e. an underpayment of tax due, in an amount of more than AED 10,000;
- where a filed Tax Return or a Tax Assessment is incorrect resulting in a calculation of the Payable Tax being less than required i.e. an underpayment of tax due, by not more than AED 10,000 and there is no Tax Return through which the error can be corrected; or
- where a filed Tax Refund Application is incorrect, resulting in a calculation of a refund to which the Taxpayer is entitled being more than the correct amount, unless the error was a result of an incorrect Tax Return or Tax Assessment.
The voluntary disclosure must be made within 20 business days of discovering the error or penalties may apply.
What are the steps to submit a voluntary disclosure in respect of a VAT return?
To submit a voluntary disclosure against a VAT return that has already been submitted to the FTA, the taxable person should go to the VAT201 – VAT Returns tab in the VAT section of the eServices portal and click on the Submit Voluntary Disclosure button in the row of the relevant VAT return for which the voluntary disclosure is to be made.
If the Submit Voluntary Disclosure button is not available for a tax return, this means that another voluntary disclosure has already been submitted against it. Taxable persons can view these previously submitted voluntary disclosures in the VAT 211 – Voluntary Disclosure/Tax Assessment section on eServices.
After clicking the Submit Voluntary Disclosure button, the Voluntary Disclosure Form for that tax period will open. The taxable person should report the updated values for the tax return here and provide the supporting documents.
The form will have details of the taxable person and the tax period prepopulated. After checking that this information is correct, the date on which the error was identified should be entered. If multiple errors were found, the date on which the first error was identified should be entered.
The Voluntary Disclosure Form has two sections:
- As Reported: the prepopulated amounts which are the figures available to the FTA at the time
- As Current: the corrected values for each box; it is important to note that these should be the total values that should have been reported for that period and not the error amounts.
The ‘As Current’ amounts are pre-populated with the corresponding ‘As Reported’ amounts, and should be amended to the new values if there was an error. If there was no error, the ‘As Current’ and ‘As Reported’ amounts should remain the same for that box.
Other selections, such as whether the business applies the profit margin scheme, can also be amended if these were made in error.
The Supporting Documentation section will ask the taxable person to upload a letter which provides background facts and a detailed description of the error(s) disclosed in the Voluntary Disclosure Form. The letter should describe the reason for the voluntary disclosure and the errors disclosed, and details of the affected sections of the tax return.
Next, the Declaration and Authorized Signatory section should be reviewed to ensure the correct details are prepopulated, and then the taxable person should check the declaration if they agree with it.
After reviewing the information entered in the Voluntary Disclosure Form, the taxable person can click the Submit button at the bottom right corner of the screen. An incomplete form can be saved by clicking on Save as draft or the form can be cancelled by clicking the Cancel button.
The taxable person can then click on the VAT 211 – Voluntary Disclosure/Tax Assessment tab to see a summary of the submitted voluntary disclosures.
For details on making a payment based on the voluntary disclosure, please refer to the FTA’s Payment Guide. Penalties may be applied by the FTA depending on the specific situation.
Voluntary disclosures can also be made for Excise Tax returns – please refer to the Voluntary Disclosure User Guide for detailed instructions.