Significance of VAT Health Checks for UAE Businesses

At a time when the landscape of VAT compliance in the UAE is witnessing drastic changes, businesses need to ensure their tax compliance measures are effective. Conducting a VAT health check can help businesses avoid tax compliance failure and related penalties. A VAT health check is an independent review conducted by experienced VAT consultants in Dubai, UAE to assess the efficacy of their VAT procedures, documentation and controls.

However, most small businesses downplay the significance of VAT health checks and attract tax audits from the Federal Tax Authority (FTA), which may lead to hefty penalties. It is advisable for businesses to understand what a VAT health check is before approaching the best tax agents in Dubai. Read on to learn about the significance of VAT health checks for UAE businesses:

What Do You Mean by a VAT Health Check in the UAE?

A VAT health check conducted by VAT consultants in Dubai may include a review of your VAT returns, transactional analysis of the current transaction scenarios of the company, maintenance of tax records, documentation formats (Tax Invoices & Tax Credit Notes), VAT compliance of the invoice received from the supplier, key compliance areas of high risk etc. Typically, a VAT health check will be carried out from an FTA audit perspective and key areas that warrant an audit will be listed.

What Will Be Covered as Part of the VAT Health Check?

VAT consultants in the UAE may include the following as part of the VAT Health Check depending upon the scope agreed upon:

  • A review of your entire VAT cycle starting from VAT registration, VAT returns filed for the whole period, assessment of books of accounts and other related VAT documents
  • Reconciliation of the accounting record and financial statements with VAT returns filed for the period
  • A review of how you carried out the input VAT calculations and assessed the accuracy of the same
  • VAT planning focuses on all the eligible transactions for maximizing input VAT claims, considering the right amount of output VAT for avoiding VAT penalties in the future whenever an FTA audit takes place
  • Identifying the errors in the VAT returns and recommending remedial measures to correct them without landing in hefty penalties later
  • Carrying out a review of compliance with other requirements such as keeping the records for the number of years mandated by the FTA, raising tax invoices as per the UAE VAT Law and other specific requirements depending upon the company’s business activities
  • Correcting the errors by submitting the Voluntary Disclosures Form, if necessary to correct the errors in the VAT returns that are already filed
  • Providing assistance for businesses to prepare the VAT Audit files with a complete audit trail
  • Ensure that the company has complied with the UAE VAT Law and FTA’s requirements
  • Ensure that the goods/services qualify as taxable supply and VAT is properly calculated
  • Ensure the company has maintained the import/export documents to support the tax treatment applied by the entity

Why is a VAT Health Check Necessary in UAE?

Carrying out VAT health checks in the UAE will help you identify the areas where attention is needed. During a VAT health check, VAT consultants in Dubai will map out corrective actions so that you can eliminate the risk of compliance failure. The recent amendment to the UAE VAT Law has given the FTA the opportunity to increase the frequency of tax audits on businesses.

The FTA can initiate a VAT audit in the UAE after issuing a notice to the tax registrant. The tax registrant will not be able to assess FTA’s area of review and to what level its business will be scrutinized. This gap can be filled by preparing oneself ahead by carrying out a tax health check so that businesses can ensure; regulatory requirements are met and effective controls are in place to identify any compliance failure.

Is a VAT Health Check Mandatory in the UAE?

It is not mandatory to carry out VAT health checks in the UAE. However, it is highly recommended to ensure you are on the right side of the VAT Law. You can even compare it to people visiting a doctor for regular health checks to assure themselves that their body is functioning normally. By carrying out a tax health check with the help of tax agents in Dubai, businesses can ensure that their tax compliance strategy is effective.

Check your VAT Health through VAT Consultants in Dubai

A first-rate VAT Health Check in the UAE will help you identify key compliance areas where more attention is required. VAT health checks will help you avoid FTA audits or successfully survive an FTA audit by ensuring compliance with the UAE VAT Law. However, you need to hire highly experienced VAT consultants in Dubai such as Jitendra Chartered Accountants (JCA) to make the most out of VAT health checks.

The tax professionals at JCA are highly qualified to provide top-class VAT health check services in Dubai. We are one of the top providers of VAT consulting services in Dubai with more than 20 years of experience. Avail of our services to ensure your tax compliance is flawless.