A Voluntary Disclosure is a form (VAT Form 211) provided by the Federal Tax Authority (FTA) that enables the taxpayers to voluntarily notify the FTA about the error or omission in a previous Tax Return, Tax Assessment, or Tax Refund application.
This is applicable only if the differential amount (Tax paid minus Actual Tax payable) is higher than AED 10,000 if the underpaid tax amount is AED 10,000/- or less. It can be corrected through the Tax Return for the tax period in which the error has been discovered. If the unpaid tax liability is more than AED 10,000/- it can be rectified using voluntary disclosure form 211.
Time Limits for Voluntary Disclosures
A Voluntary Disclosure may be reported to the FTA in the event of mistakes or omissions within 20 business days of the day the Taxable Person first discovered the error.
Penalties levied on Voluntary Disclosure
While using the voluntary disclosure system, taxpayers can alert FTA to an error, it’s crucial for businesses to be aware that penalties will be assessed on an individual basis.
Depending on the circumstances or the date of the disclosure, there are two different sorts of penalties for voluntary disclosure that will be jointly imposed: one is a set penalty and the other is a percentage-based penalty.
- Fixed penalty of:
- for the first time (3,000).
- in the case of repetition, 5,000
- The following percentage-based penalty will be imposed to the sum owed to the Authority as a result of the error and tax benefit:
- If the Registrant doesn’t make a voluntary disclosure or if he does and the Authority has already begun the tax audit process, or if the Registrant is asked for information on the tax audit, whichever comes first, the penalty is 50%.
- If the Registrant makes the voluntary disclosure after learning about the tax audit and before the Authority begins the tax audit, the tax audit will be reduced by 30%.
- (5%) if the Registrant discloses voluntarily before the Authority notifies them of the tax audit.