VAT Voluntary Disclosure

The Federal Tax Authority (FTA) has introduced a form 211 – VAT voluntary disclosure form recently. It will help the taxable persons to rectify the errors they committed in their UAE VAT Form 201 which is already filed. It is an option given by the FTA for the tax periods to voluntarily disclose the errors one has committed.

Please see below a summary in Q&A format for lucid and faster understanding:

• What is meant by Voluntary Disclosure under UAE VAT Law?

Every Taxable person has an option to rectify the contents of the VAT Return (Form 201) which were already filed. By using the voluntary disclosure option, the taxable person can rectify the amount of tax disclosed by him previously. One can use the form 211 – VAT voluntary disclosure to inform the authority and rectify the same voluntarily before the authority finds it before a tax audit or through an assessment.

• How to use the VAT Voluntary Disclosure Form 211?

Once the taxable person identifies the error or omission he made in his previous VAT return form 201, he can log in to the official portal of FTA by using their user name and password and access the VAT voluntary disclosure form 211 to rectify.

• When can one use VAT Voluntary Disclosure Form 211?

If a taxable person makes an error or omission or a wrong treatment of tax by which the output tax payable or input tax recoverable is more than AED 10,000/- for a particular period then, he must use the VAT Voluntary Disclosure form 211 to inform the authority. The form will show the original figures disclosed under “as reported” and will give an option to edit the amount under separate box named “as current”. Further the reason for such discrepancy also should be disclosed.

• Penalty while using the VAT Voluntary Disclosure Form 211?

There are two types of penalties:

1. Fixed penalty
2. Percentage based penalty

Fixed penalty – If the tax payer uses the VAT Voluntary Disclosure form 211 for the first time, AED 3,000/- shall be levied. For every repetition in using the VAT Voluntary Disclosure form 211 AED 5,000/- shall be charged.

Percentage based penalty – If the tax payer discloses less than the actual tax liability in the return and subsequently uses Form 211 VAT Voluntary Disclosure form, the percentage-based penalty will be as follows:

1. If the taxable person makes a voluntary disclosure before the authority notifies (by way of tax audit or tax assessment), 5% of the tax amount which was not disclosed earlier will be the penalty.
2. If the authority notifies the taxable person for a tax audit and during the tax audit if he makes a voluntary disclosure by using VAT Voluntary Disclosure Form 211, he will be liable to pay 50% of the tax amount.
3. If the taxable person makes a voluntary disclosure after the authority notifies for a tax audit but before starting the tax audit, he has to pay 30% of the tax amount as a penalty.