Latest Guidelines for Correction of Errors or Omissions in Tax Returns submitted to VAT?

It’s time to get more proactive, because remaining compliant with VAT requirements has become more than a matter of just being on time now; it's about getting the facts and amounts correct. 

The Federal Tax Authority of the UAE has recently issued Decision No. 8 of 2024, which came into effect on Jan 1, 2025. This decision comes with the mechanisms for people to correct any errors or omissions related to VAT returns. 

Lately, thousands of businesses throughout the Emirates updated their VAT returns, either voluntarily or under audit. Now, however, the process provides clear-cut instructions.

Read below to understand what it entails and how you can steer clear of attracting penalties due to honest errors or omissions.

What Are VAT Returns?

VAT Returns are basically official reports that are submitted by businesses to a tax authority (FTA in the Emirates), summarizing the amount of Value Added Tax collected on sales and paid on purchases during a particular fiscal timeline. 

Now, omissions or any errors in these reports can be problematic, because they may lead to regulatory scrutiny and, in extreme cases, may even attract financial penalties. 

On the other hand, if businesses fail to do a Voluntary Disclosure within the stipulated time period of 20 days by the FTA, they even risk becoming non-compliant under the UAE tax law. This is mandatory even if it does not affect the tax due.

A Stricter Approach Towards VAT Returns

In the past, minor mistakes, particularly those involving less than AED 10,000 of tax, could usually be amended in subsequent VAT returns without having to inform the FTA. But that's no longer the case. Now, even certain non-financial misstatements must be reported formally.

For example, reporting standard-rated sales in the incorrect Emirate, or mischaracterizing a zero-rated supply - are no longer construed as minor clerical mistakes. 

Even if it has no effect on overall due tax, you still have to report everything. It is also advisable to enlist the help of a trusted firm in such regards, especially since this is a new decision, and firms - like CDA, can help navigate the disclosure process smoothly.

Reporting An Error or Omission which may not change the Due tax

If any error you made falls in any of the categories below, you have to make the corrections via Voluntary Disclosure according to the FTA's guidelines even if it doesn't cause any difference in the due tax. These are: 

• Reporting standard-rated products under an incorrect Emirate
• Misclassifying or incorrectly reporting the exempt supplies either by overstating or understating it
• Misclassifying or incorrectly reporting the zero-rated supplies either by overstating or understating it 

How and When to Make the Correction?

The businesses are expected to make a Voluntary Disclosure within 20 business days of identifying the error. It is also important to understand that the deadline isn't based on when the error was made, but when you became aware of it.

The taxpayers can make the voluntary disclosure via EmaraTax portal which would provide an easy interface to make the changes. The tax payer can locate the tax return which might contain the errors and can make the disclosure in the portal itself.

Keep Your Records in Order

Now, it isn’t merely a case of filling in the correct form, you also have to support it with records and documents. The FTA generally mandates companies to keep supporting records for five years, including agreements, tax invoices, Emirates-wise breakdown of supply, and books of prime entry.

(Lack of proper documents may make your disclosure ineligible for acceptance or result in penalties due to poor record-keeping.)

Proactive Compliance

As of now, several UAE companies are shifting towards a culture of proactive VAT review. Rather than waiting until year-end for reconciliations, they're also performing quarterly internal audits to catch mistakes early. 

If you're unsure whether an error needs disclosure, it's always best to consult professionals who specialise in handling and navigating such situations- like CDA. In most situations, seeking professional guidance up front can assist you in avoiding penalties and undue anxiety.

CDA’s assistance in filing tax returns

Fixing VAT mistakes in the UAE is no longer something you can afford to mess around with; not because the regulations are tricky, but because the penalties for doing nothing are more severe. 

The revised advice under FTA Decision No. 8 of 2024 places greater onus on companies to report correctly and to move fast when it goes awry.

Precautionary thinking is the greatest defence. And in today's tax landscape, it is also the most advisable. Our expert tax agents are at your side to provide you with the best tax consultancy services and assistance to ensure the compliance with the prevailing tax laws and to avoid penalties. 

To know more about the tax services, contact CDA now.

Mitesh Maithia

Tax Manager

Mitesh is a Tax Professional with expertise in direct, indirect, and international taxation, including transfer pricing, since 2018. Passionate about making complex tax matters simple, he shares insights to help businesses stay compliant and forward-looking.