In the United Arab Emirates (UAE), businesses are required to register for Value Added Tax (VAT) and Excise Tax in UAE if their taxable supplies and imports exceed the mandatory threshold. These taxes are collected by the Federal Tax Authority (FTA), which is responsible for regulating and enforcing tax laws in the UAE. However, if businesses make errors or omissions in their tax returns, they can voluntarily disclose them to the FTA. This article seeks to furnish a guide for voluntary disclosures for VAT and excise tax UAE. Thus, it is advisable for taxable persons to avail of the services of top tax consultants in the UAE to stay compliant with tax standards to which noncompliance accrues hefty fines.
What is a Voluntary Disclosure?
A voluntary disclosure is a self-initiated disclosure made by a taxable person to the FTA. This disclosure is made when a business realizes that they have made an error or omission in its tax return, which results in an underpayment of tax or an overpayment of tax credits. Making a voluntary disclosure is an important aspect of tax compliance, as it demonstrates a business's commitment to correcting any mistakes and ensuring that they are fully compliant with the tax laws.
What are the Benefits of Voluntary Disclosure?
Making a voluntary disclosure can have several benefits for businesses, including:
- Avoiding penalties and fines: By voluntarily disclosing errors or omissions, businesses can avoid penalties and fines that may be imposed for non-compliance.
- Reducing interest charges: By paying the tax owed as a result of the disclosure, businesses can reduce the interest charges that may be imposed for late payment.
- Maintaining credibility: By demonstrating a commitment to compliance, businesses can maintain their credibility with the FTA and avoid reputational damage.
Guide to the UAE Excise Tax for Warehouse Keepers?
To make a voluntary disclosure for VAT and Excise Tax UAE, businesses need to follow the following steps:
- Identify the error or omission
The first step is to identify the error or omission in the tax return. This could be an underpayment of tax, an overstatement of tax credits, or any other mistake that has resulted in an incorrect tax liability.
- Gather supporting documents
Once the error or omission has been identified, businesses should gather all the supporting documents that are relevant to the issue. This could include invoices, receipts, and any other documentation that will help to explain the error or omission.
- Calculate the underpaid tax
Using the supporting documents, businesses should calculate the amount of underpaid tax or over-claimed tax credits. This will help to determine the amount that needs to be paid to the FTA or refunded to the business.
- Prepare the voluntary disclosure form
The next step is to prepare the voluntary disclosure form, the form should include all the relevant information about the error or omission, including the amount of underpaid tax or over-claimed tax credits.
- Submit the voluntary disclosure form
The final step is to submit the voluntary disclosure form to the FTA.
Who Can Make Voluntary Disclosures?
Any business registered for VAT or excise tax in UAE can make a voluntary disclosure. Businesses that discover errors or omissions in their tax returns or fail to disclose any taxable supplies or imports can make voluntary disclosures for excise tax UAE too.
The voluntary disclosure system also applies to businesses that have made errors in their tax returns due to an inadvertent mistake, negligence, or interpretation of the tax laws. However, businesses that engage in tax evasion, fraud, or concealment of information are not eligible to make voluntary disclosures.
Avail the Services of UAE Tax Consultants
To combat any tax intricacies and to stay compliant with tax standards, it is advisable for taxable persons to avail of the services of top tax consultants in UAE. Thus, contact us today and we shall be glad to assist you!