When a person/Business registered to FTA made an error or omission in tax return, tax assessment, or tax refund application. Then a voluntary disclosure should be made by a taxable person to notify the Authority. A voluntary disclosures are required to be made in the following cases: per Article 8 of Cabinet Decision No. 36 of 2017 on the Executive Regulation of Federal Law No. (7) of 2017 on Tax Procedures
- 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.
- A registered person must have to made voluntary disclosure to FTA within 20 business days of discovering the error or omissions.
- 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.
Fine & penalties
There are Two types of penalties levied by FTA
Fixed Penalty: The first time you file a Voluntary Disclosure, or Form 211, without any notification from the FTA, you will have to pay a fixed penalty of AED 3,000. From then on, every subsequent submission of Form 211 will require you to pay a penalty of AED 5,000 If you identify the error and submit Form 211 before any notification from the FTA, the percentage-based tax will be set at 5% of the difference in tax liability.
Percentage Based Penalty: If you identify the error and submit Form 211 after the FTA has issued a tax assessment, but before the FTA initiates a tax audit, the percentage-based tax will be set at 30% of the difference in tax liability.
If you identify the error and submit Form 211 after the FTA has initiated a tax audit, the percentage-based tax will be set at 50% of the difference in tax liability.
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