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Abu Dhabi, UAETuesday 17 July 2018

VAT q&a: What does 'Submit Voluntary Disclosure' mean on my tax return? 

The Abu Dhabi resident is confused by the term on the FTA portal 

The reader has voluntarily submitted a return as their company turnover was more than Dh187,500 a year but less than Dh375,000. Photo: Getty Images
The reader has voluntarily submitted a return as their company turnover was more than Dh187,500 a year but less than Dh375,000. Photo: Getty Images

I registered for VAT voluntarily as my turnover was more that Dh187,500 per year but less than Dh375,000. I filed my first return but can now see an action box next the return that says “Submit Voluntary Disclosure”. I am confused as to what this is and whether I need to do anything further because I registered voluntarily. EM Abu Dhabi

The recent appearance of the Submit Voluntary Disclosure box is confusing many people, especially those who were below the mandatory registration limit and registered voluntarily. This disclosure requirement has nothing to do with your VAT return or voluntary registration. The voluntary disclosure referred to is only to be used in the following circumstances if you later discover an error in a VAT return previously submitted.

The law says that if a taxable person becomes aware that a return submitted to the Federal Tax Authority is incorrect, resulting in a calculation of the payable tax being less than required by more than Dh10,000, they can make a voluntary disclosure to the authority within 20 business days once they become aware of the error. This is when you would use this tab and make a voluntary disclosure.

The law goes on to say that if a taxable person becomes aware that a return is incorrect, resulting in a calculation of payable tax being less than required by less than Dh10,000, they can correct the error in the return for the tax period in which the error has been discovered.

The only exception is If there is no later tax return after the error was discovered. This could occur if the registrant had made an error and then deregistered for VAT. In this case they should make a voluntary disclosure within 20 business days from the date of becoming aware of the error regardless of its size.

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Read more:

VAT q&a: 'Do I have to pay VAT twice on an item posted to the UAE?'

VAT q&a: 'Can a UK business visitor reclaim VAT on UAE spending?'

"Do I have to pay tax on UAE income when I return to the UK this summer?"

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When claiming input tax paid on goods bought before registration, is it necessary to hold goods after registration to claim that tax or it is possible to claim even if the goods are consumed in business? AM Dubai

The law that covers when you can reclaim input tax paid prior to VAT registration is covered in Article 56 of the Decree Law. It says that you may recover VAT paid on goods and services, or paid on the import of goods charged in the previous five years, provided that these goods or services were used to make supplies that give the right to input tax recovery upon registration.

If we consider goods, services and capital assets separately - for capital assets you can reclaim the proportion that relates to the undepreciated amount at the point you are VAT registered. For example, if you purchased an asset with VAT charged on January 1 and that asset would be used for five years to generate vatable sales, then you could reclaim nine tenths of the VAT you paid in your first return.

If you paid VAT on goods before you registered, you may reclaim it on any that you sell and charge the tax after registration. Any goods sold pre registration, where VAT would not have been charged on the sale, are not eligible for input VAT reclaim. Many businesses will purchase identical products at different times. Some may have been purchased before the introduction of VAT and some after. For the purposes of determining whether goods on hand were purchased with or without VAT you should assume that the goods purchased first were sold first, using the principle of first in first out.

Similarly if you paid for a service with VAT, which is used after registration as part of your taxable supplies then a portion of the input VAT may be reclaimed. An example here might be VAT on commercial rent where a portion of the lease period was before registration, and cannot be reclaimed, but you could reclaim the portion relating to the post registration period.

As a final point you should remember that all goods sold post registration are subject to output VAT (unless of course they are exempt) regardless of whether you paid input VAT at the time of purchase.

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Read more:

VAT q&a: 'What is the best way to make a VAT payment to the Federal Tax Authority?'

VAT q&a: 'A GIBAN number appears on my FTA page. What is that?'

VAT Q&A: 'Can a restaurant charge VAT after a two-for-one voucher has been used?'

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My landlord has invoiced me for the security deposit and added VAT, is this correct ? FS Fujairah

No, this is not correct. Taking a refundable deposit does not create a taxable supply and under the VAT legislation, VAT is only due on taxable supplies.

Lisa Martin, a chartered accountant with more than 20 years commercial finance experience, is the founder of accounting, auditing and VAT consultancy, The Counting House. Email any VAT queries to pf@thenational.ae