Jul 11, 2025 
VAT
Fixing VAT Mistakes: Your Guide to Voluntary Disclosure in the UAE
In the UAE, the Federal Tax Authority (FTA) provides a mechanism for taxpayers to correct errors or omissions in their tax filings through what is known as a Voluntary Disclosure. This process is governed under Federal Decree-Law No. 28 of 2022 on Tax Procedures, specifically Article 10, which states that a taxable person shall submit a Voluntary Disclosure to notify the Authority of any error or omission in a Tax Return, Tax Assessment, or Tax Refund application that resulted in an incorrect tax liability.
The primary objective of filing a Voluntary Disclosure is to promote transparency and compliance by allowing businesses and individuals to rectify mistakes voluntarily, rather than waiting for them to be discovered during an audit or investigation. It serves as a corrective tool that supports the integrity of the tax system while potentially minimizing administrative penalties for the taxpayer.
This blog aims to guide taxpayers through the importance of timely and accurate Voluntary Disclosures to rectify the incorrect VAT return filed, the conditions under which they are required, and the legal implications of non-compliance.
You can submit a voluntary disclosure in the following situations:
- The payable tax calculated was less than it should have been in the tax return.
- The refund amount calculated was more than it should have been in the refund application.
- The payable tax calculated is more than it should have been in the tax return.
- The refund amount calculated was less than it should have been in the refund application.
- Error or omission in the tax return already submitted to FTA doesn’t result in a difference in the amount of tax.
Under-reporting of standard-rated supplies.
If a taxable person under-reports a standard-rated supply in a previously filed VAT return, they must submit a voluntary disclosure if the difference in the payable tax is more than AED 10,000
However, if the tax difference is less than AED 10,000, the error or omission can be rectified in the quarter in which the error or omission is discovered.
This exception only applies if the taxpayer continues to be VAT-registered and has future VAT returns to file. Otherwise, even if the tax difference is below AED 10,000, a voluntary disclosure is mandatory.
Under UAE VAT law, if you identify an under-reporting of standard-rated supplies in a previous VAT return, you are required to file a voluntary disclosure within 20 business days of identifying this error if the tax difference is more than AED 10,000.
However, if the tax difference is less than AED 10,000, you are not required to file a voluntary disclosure. Instead, you can correct the error in the tax return for the tax period in which the error has been identified. Which means that you can adjust the figures in the next regular VAT return to account for the omission.
If there is no tax return available to correct an error (e.g., the person is deregistered), submitting a voluntary disclosure is still mandatory, even if the amount involved is less than AED 10,000.
Recent amendment from the FTA
Federal Tax Authority Decision No. 8 of 2024 – Issued 1 November 2024 – (Effective from 1 January 2025)
Requirement of filing a Voluntary Disclosure even if there is no tax difference
If the Taxpayer discovers an error or omission in the Tax Return submitted to the Authority, where there is no difference in the Due Tax, they shall correct such error by submitting a Voluntary Disclosure if any of the cases stated below occur.
Cases of errors or omissions without a Difference in the Due Tax:
- Reporting standard rated Taxable Supplies in relation to an Emirate in the box of another Emirate.
- Incorrect reporting of zero-rated Taxable Supplies, whether by understating or overstating.
- Incorrect reporting of Exempt Supplies, whether by understating or overstating.
Previously, if an error did not impact the payable tax, you could often correct it in the next VAT return. However, this has changed under FTA Decision No. 8 of 2024.
Now you are required to file a voluntary disclosure regardless of the tax difference if there is under-reporting or over-reporting of zero-rated supplies and exempt supplies. Additionally, the incorrect reporting of Emirates-wise taxable supplies.
For VD submissions where there is no impact on due tax (e.g., Emirate-wise misreporting), the taxpayer should retain records justifying the correction and include an explanatory note in the VD form to prevent misinterpretation.
May file VD vs Must file VD
Must File Voluntary Disclosure | May File Voluntary Disclosure |
If the submitted Tax Return or Tax Assessment is incorrect, resulting in Payable Tax being less than it should have been. | If the submitted Tax Return or Tax Assessment is incorrect, resulting in Payable Tax being more than it should have been. |
If the submitted Tax Refund application is incorrect, and you claimed a refund more than you are entitled to. | If the submitted Tax Refund application is incorrect, and you claimed a lesser refund than you are entitled to. |
The underpaid tax amount exceeds AED 10,000. | The underpaid tax amount is AED 10,000 or less, and the error is corrected in the Tax Return for the period in which it was discovered. |
Purpose: To correct errors that lead to underpayment or overclaimed refunds, as required by law. | Purpose: To correct overpayments or underclaimed refunds, at the taxpayer’s discretion. |
Why a taxpayer may wish to file a VD even when not mandated????
- To accelerate a refund correction.
- To ensure records are updated for audit trail purposes.
- To avoid future compliance disputes
Penalties for submitting a Voluntary Disclosure
FTA may impose penalties depending on specific circumstances.
Incorrect Tax Return Penalties:
- Fixed penalty: AED 1,000 for the first time; AED 2,000 for repetition
- If the tax difference is less than the fixed penalty, a penalty equal to the difference (minimum AED 500) applies.
- No penalty if the Tax Return is corrected before the payment due date.
Failure to voluntarily disclose an error in the Tax Return, Tax Assessment, or refund application as required by Article 10(1) and 10(2) of the Tax Procedures Law, before being notified of a Tax Audit, will result in:
- A fixed penalty of 50% of the error amount.
- A monthly penalty of 4% on:
a. Unpaid Tax from the payment due date until the Tax Assessment date.
b. Tax from ineligible refunds from refund date until the Tax Assessment date.
The failure of the Taxable Person to pay the due Tax stated in the submitted Tax Return, Voluntary Disclosure, or in the Tax Assessment received, within the timeframe prescribed by the Tax Law.
- 2% penalty due on the day after the original payment due date if unpaid.
- An additional 4% monthly penalty accrues each month from one month after the due date until full payment.
The Taxable Person must pay a late payment penalty up to a maximum of 300% of the unpaid tax.
Due date for payment:
- Voluntary Disclosure: 20 business days from submission.
- Tax Assessment: 20 business days from receipt.
The submittal of a Voluntary Disclosure by the Person/Taxpayer on errors in the Tax Return, Tax Assessment or refund application pursuant to Article 10(1) and 10(2) of the Tax Procedures Law.
A percentage-based penalty shall be applied on the difference between the Tax that was calculated and that which should have been calculated, pursuant to the following.
Filing the VD at the earliest possible date is critical to limit the percentage-based penalties, which increase annually from 5% to 40% of the tax difference.
Where VD is submitted… | Penalty Rate |
Within 1 year | 5% on the difference |
Within 2nd year | 10% on the difference |
Within 3rd year | 20% on the difference |
Within 4th year | 30% on the difference |
After 4 years | 40% on the difference |
For further guidance, refer to FTA Public Clarification VATP021, which outlines when and how to submit voluntary disclosures.
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