How to Correct Your VAT Errors in VAT Return?
Using a form known as a VAT Return, sometimes termed a Tax Return, a registered person or entity is required to submit reports on a regular basis to the relevant tax authorities. When completing a VAT Return, you could occasionally encounter the phrase “VAT Error.” A VAT error occurs when the taxpayer either fails to recover the correct amount of input tax or fails to charge and account for the correct amount of output VAT (Value Added Tax).
This holds true regardless of the amount of tax that was paid to the Federal Tax Authority (FTA)—too much or too little. In any scenario, the tax amount that was reported to the FTA has to be corrected. Form 211 has been created by the FTA to rectify any errors or omissions in the filed VAT Return Form 201. With the use of this form, any mistakes or omissions in the previously filed VAT Return can be fixed.
It is important to remember that mistakes in previous VAT filings may be corrected for a period of five years, excepting cases of tax evasion or non-registration. As of January 1, 2018, the date of VAT implementation, the Federal Tax Authority (FTA) and a taxable entity may choose to voluntarily submit errors to the FTA within five years of the end of the tax period in which they occurred.
The FTA has the authority to collect taxes in cases of tax evasion or non-registration for a maximum of 15 years after the date the taxable enterprise should have been registered or the end of the tax period in which the tax evasion occurred. When a taxable entity commits a tax error, the FTA is also able to impose sanctions.
Types of VAT Return Errors
1. Tax Value of 10,000 AED or Less:
• If there is a gap of AED 10,000 or less due to the error in the tax return, it should be rectified directly on the tax return for the particular reporting period in which it was discovered.
• In its place, if the error is found later and can’t be fixed by filing an amended tax return (because the taxable person isn’t registered for VAT, for instance), a voluntary disclosure must be made to the Federal Tax Authority (FTA).
2. Tax Value Above Ten Thousand AED:
• If the tax return error costs more than AED 10,000, the FTA should be notified through a formal voluntary disclosure process.
• It is required of the taxable individual to send this voluntary notification to the FTA no later than 20 working days after discovering the inaccuracy.
• The disclosure needs to be given in the precise format that the FTA specifies for this purpose.
Tax Charges
Errors can occasionally be found on tax invoices, particularly in the following circumstances:
• Inaccurate Tax Charged: This occurs when an invoice has tax applied to it when there was no tax owed on the provided goods or services.
• If the incorrect amount of tax is charged, it can also occur.
When a supplier’s invoice has more tax than it should have, they have to record and include that amount in their tax return, unless they have already fixed the problem by giving a credit note. If the tax amount on the invoice is more than it should be, the seller must report and account for the proper tax amount that should have been charged in their tax return.
In every case, the seller must take corrective action to make up for the mistake. In most cases, this means either reissuing a revised tax invoice or issuing a credit note in cases where the tax was initially charged wrongly. For example, if a zero-rated supply was subject to VAT, the seller must issue a credit note to the customer to cover the incorrectly charged VAT. However, in the event that a standard-rated delivery was made without VAT, the seller must provide a new tax invoice that accurately reflects the amount of VAT.
If a customer feels they have been overtaxed or erroneously taxed, they should get in touch with the supplier and request a corrected invoice or credit note that correctly reflects the entire amount of tax. This is a crucial step because without a valid tax invoice for the supply that precisely shows the amount of tax imposed, the recipient is unable to claim input tax. In addition to ensuring that tax regulations are obeyed, this process allows receivers to claim the appropriate tax deductions.
Tax Refunds
When submitting tax refund applications with the FTA, individuals or businesses—including those not established in a GCC Implementing State and not involved in UAE business activities—must adhere to specific error-rectification processes. If an error is discovered in the tax refund application, regardless of its size, the individual has a rigorous 20-business-day window of time in which to submit a voluntary disclosure to the FTA. For example, if your internal audit reveals a tax error, you must promptly file a voluntary disclosure to the FTA.
Nonetheless, if the error in the tax refund application is caused by inaccurate tax assessments or returns, the proper procedures for fixing such errors should be followed. Depending on its nature and extent, an error may be rectified by filing a voluntary disclosure or by amending it on a later VAT return. This plan guarantees accurate financial and tax reporting while adhering to legal requirements.
How IBR Group Can Help?
The UAE VAT Law requires all people who are subject to taxation to file their VAT Return as correctly as possible within the allotted time frame, which is 28 days after the conclusion of each tax month. It is essential for a taxable organization to ensure the processing of the VAT Return Filing in order to minimize the need for the VAT Voluntary Disclosure Form 211 and prevent fines.
IBR Group is prepared to assist you in the United Arab Emirates, including site visits to ensure compliance and the preparation of your VAT return. This will make it more likely that your VAT returns will be correctly filed and submitted on time. Please contact us at any moment if you need help.