Federal Tax Authority Decision No 8 of 2024 on Voluntary Disclosure

Federal Tax Authority Decision No 8 of 2024 on Voluntary Disclosure

by | Nov 25, 2024

The Federal Tax Authority has issued Federal Tax Authority Decision No 8 of 2024 on Mechanism for Correction of Error or Omission in the Tax Return submitted to the FTA for VAT.

Effective 1 January 2025, the FTA has provided an exhaustive list of cases of errors and omissions for which a taxpayer will be mandatorily required to file a Voluntary Disclosure (VD) despite no change in the VAT liability

In August 2023, Article 10(3) of the Tax Procedures Regulations was introduced which made it mandatory for taxpayers to file VDs in cases where there is no change in the tax liability. A Public Clarification (TAX-P006) was also released to provide certain scenarios to which such amendment would apply.

The Federal Tax Authority Decision 8 of 2024 specifically provides the following scenarios under which filing of a VD will now be mandatory for the taxpayers

Scenario Implications
Reporting standard rated Taxable Supplies pertaining to an Emirate in the box of another Emirate
  • UAE VAT return requires a taxpayer to report the taxable supply under the relevant Emirates (under Box 1) where the fixed establishment most closely related to the supply is located
  • Accordingly, if the taxpayer has reported the taxable supply under an incorrect Emirates, it is now mandatory to revise the return through a VD and disclose the taxable supply in the correct Emirates
Incorrect reporting of zero-rated Taxable Supplies, whether by understating or overstating
  • A taxpayer is required to disclose value of exports for goods or services (zero-rated supplies) in Box 4 of the VAT return
  • Taxpayers often fail to report the value of such sales as there is no VAT impact or misreport the same due to incorrect classification (like interchangeably classifying out of scope sales as zero rated or vice versa)
Incorrect reporting of Exempt Supplies, whether by understating or overstating
  • A taxpayer is required to disclose value of exempted supplies in Box 5 of the VAT return
  • Value of exempt supplies also have an impact on the value of input VAT claimed specifically in cases where an Input apportionment is required

In all the above cases, while there is no impact on the VAT liability, such an error will now warrant filing of a VD. Although the Decision does not specifically provide, a VD in such cases should be required to be filed within 20 business days of identifying the error.

Despite the changes in the Regulations, the EmaraTax portal currently does not permit filing of a VD in case the tax differential is less than AED 10,000. With the new Decision issued, it is expected that the portal will be updated soon, allowing filing of VD in such cases.

Taxpayers should review and assess the impact of above changes and identify the cases where there is a requirement to file VD.

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