VAT compliance in the UAE requires businesses to accurately file their VAT returns with the Federal Tax Authority (FTA) every tax period. However, mistakes can happen—whether it’s a simple numerical error, incorrect tax treatment, or missed invoice. Thankfully, the UAE VAT system provides businesses with the opportunity to correct such errors in accordance with the law.
This blog will guide you through the process of identifying, correcting, and reporting VAT return errors in the UAE, while ensuring compliance and avoiding penalties.
Need assistance correcting your VAT returns or handling disputes with the FTA? PEAK Business Consultancy Services provides end-to-end VAT compliance and correction services for businesses of all sizes across the UAE.
1. Types of Errors That Can Occur in VAT Returns
Common errors in VAT returns filed by UAE businesses include:
- Incorrect calculation of output or input tax
- Omission of taxable sales or purchases
- Claiming ineligible input VAT
- Failure to apply the correct VAT rate (5%, 0%, or exempt)
- Wrong TRN (Tax Registration Number) entries
- Currency or rounding discrepancies
Regardless of whether the error benefits or disadvantages the taxpayer, it must be rectified to ensure compliance.
2. When Can You Amend a Filed VAT Return?
The UAE VAT Law allows for the correction of errors in two primary ways:
- Amendments within the same VAT return period: If the error is identified before the return deadline, it can be corrected before submission.
- Amendments after submission: If the error is discovered after filing, the FTA allows corrections within the next VAT return period, or via a Voluntary Disclosure if above a certain value.
It’s important to assess the materiality of the error to determine the correct procedure for correction.
3. Material vs. Non-Material Errors
Errors in VAT returns are classified into two categories:
Non-Material Errors
Errors that result in a difference of less than AED 10,000 in tax liability. These can be corrected in the subsequent VAT return without filing a Voluntary Disclosure.
Material Errors
If the error results in a difference of AED 10,000 or more, a Voluntary Disclosure must be submitted through the FTA portal using VAT Form 211.
Filing a Voluntary Disclosure is a legal obligation under UAE tax law and must be completed within 20 business days from the date the error is identified.
4. How to File a Voluntary Disclosure
Here is a step-by-step process for submitting a Voluntary Disclosure for correcting VAT return errors:
- Login to the FTA e-Services portal using your credentials.
- Select “VAT” from your dashboard and navigate to “VAT201 – VAT Returns.”
- Choose the VAT return you wish to correct and click “Submit Voluntary Disclosure.”
- Fill out Form VAT211 with details of the original and corrected values.
- Provide a detailed explanation and upload supporting documentation (e.g., invoices, contracts).
- Review and confirm the submission. You will receive an acknowledgment from the FTA.
Depending on the nature and impact of the error, the FTA may contact you for further clarification or initiate a tax audit.
5. Penalties for Not Correcting Errors
If a business fails to voluntarily correct a known error, it may face administrative penalties. These include:
- Fixed penalty of AED 3,000 for the first voluntary disclosure
- AED 5,000 for subsequent disclosures
- Percentage-based penalty of up to 50% of the difference if the error is discovered during an audit
Hence, it’s essential to act swiftly upon identifying a discrepancy in your previously filed VAT returns.
6. PEAK Business Consultancy Services: Your Partner in VAT Compliance
Correcting VAT return errors is a sensitive process that requires technical expertise, documentation, and strategic communication with the FTA. PEAK Business Consultancy Services can help your business navigate this process with confidence. Our services include:
- Identifying VAT filing errors and discrepancies
- Filing Voluntary Disclosures and communicating with FTA
- Documenting and substantiating tax positions
- Post-correction monitoring and advisory
We work with businesses across all industries to ensure ongoing VAT compliance and mitigate risk. Contact us today to correct errors efficiently and avoid costly penalties.
7. Conclusion
Mistakes in VAT returns are common, but the key lies in addressing them proactively and in accordance with FTA regulations. Whether the error is minor or significant, businesses must understand the rules around corrections, the applicable thresholds, and the procedures for filing disclosures.
To ensure you’re on the right track, consult experienced tax professionals like PEAK Business Consultancy Services who can guide you through every step of the amendment process—safeguarding your compliance and reputation.
