Filing a voluntary disclosure VAT in UAE is notifying the UAE Federal Tax Authority (FTA) to know regarding a non-compliant activity or error in a company’s VAT returns without being prompted. The act is an honest business practice that aims in putting matters right when accounts and finances of a business pertaining to VAT have been found to be erroneous.
With voluntary disclosure vat in UAE, it doesn’t matter why the tax affairs of a business are wrong. It is better to notify the FTA and alert them of any inaccuracy instead of waiting until you are contacted by the tax authority. The latter option of waiting until mistakes are uncovered by the FTA itself will entail a bigger administrative penalty.
Step 1: Notifying the FTA.
You must tell the FTA that you intend in making a disclosure. It is best to have a regulated tax agent in Dubai do this the moment you know a VAT return submitted to the tax authority contains mistakes. At this stage, you’ll only need to inform the FTA that you will be making a voluntary disclosure. No details have to be given yet, including any tax or undisclosed income that you think you owe. You can tell the FTA about a voluntary disclosure you will be making about a limited liability company, about an estate or trust, or about the tax affairs of your company.
Step 2: Prepare and submit your disclosure (Voluntary disclosure VAT).
Depending on the unique circumstances of your business, calculating what you owe to the FTA can be either simple or complicated. This is when it is absolutely crucial to have independent professional advice from a VAT specialist in UAE. Although you have a maximum of twenty days to make a voluntary disclosure, you should begin gathering together records and information the soonest as possible.
You will have to work out additional liabilities for the year that was wrong. If you have already paid your VAT dues and you want to tell the FTA regarding an additional income for a VAT period, then make sure you take this into consideration in your calculations.
If you don’t have all your business records required in making a voluntary disclosure for VAT in UA, then you should estimate an undisclosed income and utilize this in making a disclosure. An FTA officer will be sent to your business to ask how you have worked out the estimate that you have used. Make sure that you keep your calculations.
You will need bank statements for a relevant VAT period of the disclosure. Contact your bank to get copies if you don’t have them already. If you can’t get copy statements, you’ll be asked why you are not able to get them. Take note: not having the appropriate records required by the FTA will entail a separate fine or penalty.
If you haven’t kept the proper business records especially pertaining to VAT transactions, then you need to start immediately. You will be fined, but you can get even bigger penalties if you are found to commit the same mistakes in the future.
Step 3: Pay what you owe to the FTA.
Unless you have contacted the FTA for an additional time in making the payment, you’d have to send the payment during the submission of the voluntary disclosure vat. The FTA has to receive the payment no later than twenty days from the time the business has uncovered an error in a VAT return that amounts to more than AED 10,000.
If you don’t pay the outstanding liabilities of your company to the FTA, then the tax authority has the discretion in taking steps in order to recover money owed to them. The FTA accepts payment through a wide range of methods; however, it is best to settle VAT dues electronically with the help of a tax professional in UAE as it is the method that’s most secure.
If your business is unable to pay what it owes, then that’s bad news as the FTA expects a business to pay as soon it makes a voluntary disclosure. If you’re not able to settle the full amount, then it is best to let the FTA know immediately. Have a tax specialist help you and represent your business. Your representative may talk about your business’ current financial situation and discuss with the tax authority the means in settling VAT dues.
There may be a need to disclose how and when the business intends in paying what it owes, what the business’ liabilities are e.g. loans, mortgages, and credit cards, what assets the business has including property, vehicles, money in a UAE or international bank, and what the business earns in a weekly or monthly basis.