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The Federal Tax Authority (FTA) has introduced the 'Voluntary Disclosure Form' VAT 211 Form in the VAT Portal. This will help the taxpayers to rectify the errors/omissions they had committed while filing VAT Return Form 201 for any of the previous periods. In this article, let us understand what is Voluntary Disclosure Form VAT 211 and the situations in which the form should be used.
A Voluntary Disclosure is a form provided by the Federal Tax Authority (FTA) which enables the taxpayers to voluntarily notify the FTA about the error or omission in a previous Tax Return, Tax Assessment or Tax Refund application.
For example, M/S Abdul LCC had filed VAT Return Form 201 for April, 2018 by declaring standard rated sales as AED 15,00,000 with output VAT AED 75,000. Later, in the month of May,2018, they discovered that the actual standard rated sales were AED 17,50,000 and the output VAT was AED 87,500.
This implies that M/S Abdul LCC have underpaid the tax by AED 12,500 for April, 2018 VAT Returns. Now that it is discovered, they have to voluntarily notify FTA about the error/omission using the Voluntary disclosure form.
There are specific scenarios where a Voluntary Disclosure Form should be used by taxpayers. This would be applicable in cases where a taxpayer becomes aware of an error or omission in a Tax Return, Tax Assessment or Tax Refund application, as below:
1. Tax paid is less or more
If you become aware that a Tax Return submitted by you to the FTA or a Tax Assessment sent to you by the FTA is incorrect, which resulted in following situations:
1. Calculation of payable Tax being less than it should have been,
2. Calculation of payable Tax being more than it should have been
In the above situations, you must submit a Voluntary Disclosure to correct such error.
This is applicable only if the differential amount (Tax paid minus Actual Tax payable) is higher than AED 10,000
You can consider the above example of M/S Abdul LCC and observe that the tax differential payable is higher than AED 10,000.
2. Tax refund claimed is more or less.
If you become aware that a Tax refund application that you have submitted to the FTA is incorrect, which resulted in calculating the refund amount to which you are entitled is more or less than it should have been, you must submit a Voluntary Disclosure to correct such error.
In case of errors or omissions which has resulted in the calculation of tax payable being less than the required and the differential amount is more than AED 10,000, you need to make a Voluntary Disclosure to the FTA within 20 business days from the date when the Taxable Person became aware of the error.
As mentioned above, the Voluntary Disclosure is required only if the payable tax (Differential amount) is higher than AED 10,000. In all other cases where the differential amount payable is less than AED 10,000, you need to correct the error in the tax return for the tax period in which the error has been discovered.
While the Voluntary disclosure mechanism allows the taxpayers to notify the error to FTA, it is also important for businesses to take a note that penalties will be levied on case to case basis. The only way by which business can avoid situations leading to voluntary disclosure and applicable penalties is by filing the correct VAT Returns and refund applications. Business can easily achieve this by using a Tax accounting software.