How to Rectify VAT Errors and Make Adjustments in the UAE?

If you are considering a business setup in the UAE, ensuring that  VAT returns are accurate is important. The UAE's taxation system requires you to be diligent in the reporting, and if there are errors, it is crucial to know how to correct them promptly. This article will help you understand the different types of VAT return errors, recent regulatory updates, and the steps involved in correcting VAT errors successfully.

Understanding VAT Return Errors

VAT return errors are discrepancies or mistakes in the information submitted to the Federal Taxation Authority (FTA). They can range from minor mistakes, such as miscalculating VAT amounts, to more significant issues, like incorrect reporting of taxable supplies. The errors can creep in due to human oversight, misinterpretation of VAT rules, or technical problems with the accounting software.

Given the fact that VAT return errors are common, learning to correct them is essential as it helps in avoiding penalties, interest, and potential audits. Recognising VAT errors and rectifying them is critical in maintaining compliance with UAE tax laws.

The legal framework for amending VAT returns in the UAE is governed by the UAE Federal Law No. 8 of 2017 on VAT and its subsequent amendments. Under the law, businesses are required to disclose any VAT errors voluntarily within a specific period.

What is FTA Decision No. 8 of 2024?

The FTA Decision No. 8 of 2024 is a recent amendment that made significant updates to the VAT framework in the UAE. It mainly addressed the correction of VAT return errors to ensure transparency and compliance. The amendment changed the process involved with correcting VAT errors and making adjustments to their VAT returns.

Types of Errors Covered Under the FTA Decision

The FTA Decision No. 8 of 2024 addresses various types of VAT errors. Reporting VAT errors must be done using the appropriate procedures outlined by the FTA. Let us take a look at them:

1. Calculation Errors: Mistakes in calculating the payable or refundable VAT.
2. Incorrect Reporting of VAT on Supplies: Errors in reporting taxable, exempt, or zero-rated supplies.
3. Input Tax Errors: Incorrectly claiming input tax on non-eligible expenses or failing to claim eligible input tax.
4. Errors in VAT Filing Periods: These are mistakes related to the timing of VAT reporting, such as reporting it for a wrong tax period.
5. Omission of Transactions: Failure to report transactions that should have been included in the VAT return.

Procedures for Amending VAT Returns in UAE

Now that you are aware of how important it is to correct VAT errors promptly, let us look at the involved process of amending VAT returns in UAE:

Step 1: Review the VAT return to identify any discrepancies or errors.

Step 2: Gather all necessary documents, such as invoices, receipts, and other relevant records, to support the amendment.

Step 3: If the error is a minor one, you can correct the VAT errors by submitting an amended VAT return in UAE. It involves filing a new return with the correct information.

Step 4: For significant errors, you may need to submit a voluntary disclosure form to the FTA. It should contain details of the mistake and explain the correction.

Step 5: If the correction results in paying additional VAT, you must pay the outstanding amount promptly to avoid penalties.

Step 6: Maintain detailed records of the amendments made, including the supporting documents, for future reference and audits.

Why Commitbiz?

Correcting VAT return errors is essential for maintaining compliance with the UAE's VAT system. At Commitbiz LLC, our team of experts can help you navigate the complexities of VAT in the UAE. Whether you are looking to file VAT returns or amend returns and make adjustments, our consultants are here to streamline all regulatory processes. Contact us to learn more about our services and ease the regulatory burden!