UAE VAT Return Correction: 6 Powerful Ways to Avoid Errors

Table of Contents

What Is UAE VAT Return Correction?

Correction of UAE VAT Return is a term that describes the process through which erroneous details provided on a prior VAT return filed by the VAT-registered entity will be corrected.

Common errors that can be corrected include:

Incorrect declaration of sales or purchases figures.
Exclusion of taxable transaction from VAT returns.
Incorrect claiming of input VAT which is not recoverable.
Wrong application of VAT treatment or tax rate.
Incorrect inclusion of transaction in the wrong tax period.
Errors in calculation or data entry.
Incorrect declaration of VAT liability or VAT repayment.

The method of correcting is determined by the type of the mistake, whether the due date for submission of the return has been missed and whether there was an impact on the amount of tax or repayment.

FTA explains how to correct mistakes made in VAT returns in its VAT FAQs.

When Should You Correct an Incorrect UAE VAT Return?

Errors should be detected and rectified by business organizations once they become aware of any mistakes rather than relying on an audit or notice from FTA.

This all will depend upon the situation.

1. Errors Discovered Before the Filing Deadline

In case an error is found in the return submitted by you prior to the filing deadline, make sure that EmaraTax portal provides the facility of making changes in your return.

FTA has issued guidance that eligible returns can be modified until the filing deadline. Make use of the portal instructions and verify the correct information.

2. Errors Resulting in Underpaid VAT

If an incorrect return understates the VAT payable, you must determine the appropriate correction route.

Under the FTA’s published guidance:

If the underpayment is AED 10,000 or less, the correction can generally be made through the relevant VAT return, subject to the applicable conditions.
If the underpayment is more than AED 10,000, a Voluntary Disclosure is generally required.

This is not meant to be applied as a hard and fast rule in all situations. There might be a need for different treatment when there are errors which have no impact on the taxes owed, wrong claims for refunds, or any other situation.

3. Errors Affecting VAT Refunds or Other Return Information

The process to correct an incorrect claim for a refund or a mistake that doesn’t affect the amount of taxes owing is different from what is required when one simply makes a mistake on their tax return.

Consider the exact situation and review FTA’s instructions accordingly.

What Is UAE VAT Voluntary Disclosure?

A UAE VAT Voluntary Disclosure is a formal submission to the FTA to notify it of an error in a previously submitted tax return, tax assessment or eligible refund application.

It allows a taxable person to disclose qualifying errors and provide corrected information.

A Voluntary Disclosure may be necessary when:

The previously filed VAT return had understated the amount of tax to be paid exceeding the threshold.
An incorrect return/assessment had overstated the tax liability.
There was an understatement of the refund amount resulting from an incorrect refund application.
The provisions stipulate that such an error must be disclosed.

A Voluntary Disclosure does not automatically eliminate penalties. The tax impact, timing of the correction and applicable administrative penalty provisions can influence the consequences.

Businesses should consult the FTA’s Voluntary Disclosure User Guide to understand the procedure and applicable conditions.

A Guide for Fixing Errors in Your VAT Returns for UAE

Businesses should be able to use an organized process in correcting any mistakes that they make while recording VAT.

Step 1: Find the Mistake

Examine the VAT return of the business and analyze against journal entries, sales invoices, purchase invoices, and calculation of VAT.

Determine the kind of mistake made and the period during which the mistake was made and its impact on VAT.

Step 2: Determine the Right VAT Amount

Recompute the amounts concerned using the correct accounting method and proper tax treatment.

Determine whether there is an under-payment, over-payment, or if there is an error committed in computing the refund amount without changing the tax payable.

It is important to record the original amount, re-computed amount, and the process used in determining the discrepancy.

Step 3: Identifying the Proper Correction Technique

Review the latest FTA guidelines to determine if it’s possible to solve your issue through an eligible return, or if you need to make a Voluntary Disclosure.

Don’t just look at the amount. Think about the nature of the error, the relevant tax year, the due date for filing, and other considerations.

Step 4: Access the EmaraTax Portal

Log into the EmaraTax portal on the website of the FTA and enter the account of the relevant taxable person.

Choose the options available for your particular VAT return. If your return can be modified, proceed accordingly by following the directions on the portal. Otherwise, consider preparing a Voluntary Disclosure.

Step 5: Submit the Correction or Voluntary Disclosure

Please submit the correct figures along with all necessary documents in support of your request to the FTA.

However, before you do that, please make sure that the figures regarding the transaction, output VAT, input VAT, and the relevant taxes are the same as in your supporting documents.

Step 6: Settle Any Additional VAT and Retain Records

If there is an additional VAT to be paid on account of this correction, pay it in compliance with the relevant provisions.

Keep all the original documents, corrected figures, invoices, letters, acknowledgement of the filed return and proof of payment. This will assist in showing how the error was detected and settled.

UAE VAT Penalties for Incorrect Returns

Wrong submission of VAT forms by organizations is likely to result in penalties, according to the conditions and relevant tax process legislation.

These might include:

Tax report is incorrect: The mistake made which leads to an incorrect tax situation could lead to further action being required and possible penalties.
Corrective measures not made on time: Failure to make the necessary corrections within the specified period of time may cause further issues.
Late payment: Where there is still outstanding VAT to be paid past the deadline, this could lead to further actions.
Refund claim is incorrect: The erroneous refund claim could need correction according to the rules.

The amount of any penalty will be determined by the relevant legislation, the nature of the breach, the time at which the problem is fixed, and the facts surrounding the matter. Businesses should refer to the relevant VAT legislation of the FTA rather than an old penalty table.

Important: Voluntary disclosure does not always result in avoiding administrative fines. Correcting the situation and proper reporting are key elements, but the result is determined by the relevant laws.

Documents Required for UAE VAT Return Correction

The documents required will vary according to the nature of the mistake made and the procedure for correcting it. It is always helpful to prepare the appropriate documentation beforehand.

Common supporting records include:

Original VAT returns and tax periods.
Sales and Purchase tax invoices.
Credit/debit notes where applicable.
Accounting/general ledgers.
VAT reconciliation schedules.
Calculations to show corrected tax payable.
Explanation of the error/where the mistake was made.
Correspondence with FTA.
Evidence of payment where VAT has been overpaid.

Make sure that the entries in your accounting system correspond to the adjusted return or disclosure. It will be difficult to explain the adjustment due to the discrepancy.

The Ways Firms Can Avoid VAT Returns Mistakes

Error prevention is usually more efficient than error correction. It is important for companies to have a standard VAT audit procedure prior to filing deadlines.

Consider the following practices:

Reconciliation of records should be done periodically: VAT Control Accounts VS Sales and Purchases Accounts and General Ledger.
Look at the information on the invoice: Check whether the invoice has got all the necessary information in case of claiming input VAT.
Determine VAT status: Find out whether the transaction is standard-rated, zero-rated, or exempt, etc.
Work on effective accounting systems: Avoid errors in calculations by using appropriate accounting software.
Do a review before submitting the VAT: Ensure that someone reviews the VAT form before its submission.
Keep your records in order: Keep your invoices and reconciliation sheets, among others, organized.
Deal with any identified errors: Analyze the discrepancies and ensure the right procedure is followed.

These measures help improve reporting accuracy and reduce the risk of recurring compliance problems.

How E-Startup Can Help With UAE VAT Compliance

Making corrections to a VAT return is not just a matter of altering a figure. Companies need to find the error, work out what the right position is, and apply the right process.

E-Startup can assist businesses seeking support with UAE VAT compliance and correction requirements, including reviewing discrepancies, understanding the applicable correction process and preparing the information needed for submission.

This type of help will prove very effective especially where the mistake affects more than one tax period, is worth a lot of VAT or involves penalties to be calculated.

Ensure that you verify all the relevant regulations in light of the most recent advice from the FTA.

Conclusion

Correction of the inaccurate VAT return is another important aspect to be considered in order to ensure tax compliance in UAE. The firm must identify the error and calculate the exact amount of tax that should be paid.

Knowledge about procedures for UAE VAT Return Correction, maintenance of proper documentation and review of the latest FTA advice will enable organizations to avoid errors and compliance risks.

For any assistance regarding the correct procedure for UAE VAT Return Correction or any other concerns about VAT return, do reach out to E-Startup.

Frequently Asked Questions

1. How can I correct an incorrect UAE VAT return?

Check the error, determine the exact VAT, and follow the relevant FTA correction process. In light of the situation, it might either be possible to rectify the mistake via a VAT return or you would need to file for Voluntary Disclosure at EmaraTax.

2. When is a Voluntary Disclosure required for UAE VAT?

Under the FTA’s published guidance, an underpayment exceeding AED 10,000 generally requires a Voluntary Disclosure. Errors involving AED 10,000 or less may generally be corrected through the relevant VAT return, subject to applicable conditions and exceptions.

3. Can I face penalties for an incorrect VAT return in the UAE?

Yes. The result will vary depending upon the error and laws that apply. It could involve penalties from an administrative point of view or consequences for being late with payments.

4. Which documents should be presented to amend a UAE VAT return?

Records to be kept include the original VAT return form, purchase/sales invoices, counting ledger, VAT reconciliation, corrected calculation and explanation forms, and others depending on the circumstances.