As humans, it is inherent for us to make mistakes – be it committing a small error or getting lost on how things should be done. The same thing might happen while preparing VAT returns. It is essential that the return being prepared is compliant with the relevant VAT laws and regulations. These laws and regulations are occasionally being misinterpreted or sometimes, small mathematical errors and omissions are being committed. There are some cases too that because of insufficient knowledge of these laws and regulations, a person might be making a grave mistake while preparing the VAT returns. However, these are not valid excuses. The value of these errors will be the determining factor on how you can correct these errors.
As per the FTA, a VAT error (“tax error”) occurs when a taxable person does not charge and account for the correct amount of output VAT or does not recover the correct amount of input VAT. This applies irrespective of whether a taxpayer has overpaid or underpaid the amount of tax due to the FTA.
A Taxpayer needs to check first how much is the effect of the error or omission made to ascertain the approach that he can or should use to correct his VAT error.
Voluntary disclosure form is available in your tax portal. Just simply go to VAT201 – VAT Returns and click on the Submit Voluntary Disclosure. Once done, the system will show the details of the Taxable Person. I advise to seek help from Registered Tax Agents to ensure that the process and the Voluntary Disclosure will be accurate. They can also assist you for further supporting documentation that the FTA requires. We do not want to commit the same mistake twice, right?
Unfortunately, if you are required to submit a Voluntary Disclosure, administrative penalties are highly to be imposed.
As per Cabinet Resolution No. (40) of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE, Table 1, two penalties are being applied:
If you are correcting the error or omission through VAT return, I advise to keep proper workings, especially the reconciliation of the VAT being reported. In case that the company will be subject to VAT audit, you can just easily present the figures to the auditor in charged and to avoid further misunderstanding.
In case of correcting the error through Voluntary Disclosure, I advise for you not to hesitate to correct it as soon as you discovered the error. Contact a registered tax agent and discuss the situation so they can further advise you regarding your case.