Tax Audit in the UAE: Know the Procedure & Prepare Yourself
The Tax Procedures Law (Federal Decree-Law no. 7) defines a Tax Audit as a procedure undertaken by the Federal Tax Authority to inspect the commercial records or any information or data related to a Person conducting Business. Tax audits in the UAE are conducted by the FTA to enable the government to assess a taxable entity is complying with the tax laws and requirements pursuant to the VAT Laws and Excise Tax Laws. Through the tax audit, the FTA will examine whether the taxable persons have paid every liability, and all the tax due is collected and given to the government within the stipulated timeframe. As per Article (17) of the Tax Procedures Law, the FTA can conduct the tax audit at its office or the business premises of the taxable person or any place where the person conducts his business (places where the entity keeps records or store goods).
A Detailed Look at the Tax Audit Procedure by the FTA
The FTA authorities will inspect the tax returns and other information during a tax audit and there need not be any particular reason for the FTA to conduct an audit on the taxable entity. The FTA is allowed to conduct the tax audit in the UAE for any reason or at any time. However, the FTA will send a notice to the company at least five days before the date in which the tax audit is scheduled (as per Article 17 of Tax Procedures Law). In normal circumstances, the tax audit will take place during the FTA working hours (as per Article 19 of Tax Procedures Law). However, the Director-General of the FTA has the right to conduct the UAE tax audit of business outside the working hours if it is an exceptional case. The company, their legal representatives, and the tax agents are required to provide all the assistance to the FTA officials who conduct the audit. The auditors can call for a re-audit if they report anything suspicious that during the audit.
How You Can Prepare for the UAE Tax Audit?
Tax consultants in Dubai can assist the businesses to get organized when they are requested for tax audit from the FTA. Following the guidelines of professional consultants will boost the confidence of the businesses to face the UAE tax audit. Given below are some of the top tips to prepare businesses for tax audits in the UAE.
1. Review of the System
Since the tax auditors examine all the tax-related transactions, the businesses need to ensure that there is no inconsistency in any records. With the help of experienced tax consultants in Dubai, UAE the businesses can review their systems to ensure that the transactions are being recorded properly. Businesses need to ensure that their accounting software to comply with the VAT accounting requirements.
2. Review of Calculations Tax
The businesses need to focus on the calculations of both output and input tax in order to ensure that they are complying with the UAE VAT laws. The standard tax rate in the UAE 5% only and many goods or services that are subject to zero or exempted VAT rates should be treated as such with sufficient document support. Consult with the best VAT consultancy services in Dubai to ensure that you are on the right side of the UAE VAT Law.
3. Review of VAT Returns
The VAT-registered businesses are required to file the VAT return online through the FTA portal. The VAT return filing involves the online submission of values of sales, purchase, output VAT, and input VAT, etc. in the appropriate boxes of VAT return form in the FTA portal. With the help of the best VAT consultants in Dubai, the businesses can ensure that the returns are filed in the proper manner. The tax consultants in Dubai can assist the businesses to record the values in the right boxes and the required information is filed in the time frame specified by the FTA.
What are the Records to Be Maintained for A Tax Audit?
As Article (78) of Federal Decree-Law states that a registrant shall maintain the following records to be made available to FTA when asked:
- Records of all supplies & imports
- Tax invoices and documents related to receiving goods & services
- All tax credit notes and documents received
- All tax invoices and documents issued
- Records of goods and services that were disposed of for matters unrelated to business and records showing tax paid to the same
- Records of Goods and Services purchased and for which the Input Tax was not deducted.
- Records of exported Goods and Services.
- Records of adjustments or corrections made to accounts or Tax Invoices.
- Details of Goods imported along with Customs declarations and Supplier Invoices
The list is not exhaustive but the FTA may demand any further document. Consult with the best tax agents in Dubai to prepare the documents in compliance with the tax laws.
Consult with the Best Tax Auditors in Dubai
Tax registered individuals and companies in the UAE are required to comply with the VAT Laws, Excise Tax Laws, and other regulations issued by the FTA. Failure to comply with the laws may attract hefty penalties from the FTA. A tax audit in the UAE is a process to ensure that the tax registrants are complying with the tax regulations. Since the tax audit in the UAE is conducted by the FTA, the businesses need to ensure that all the invoices and other documents are prepared in compliance with the laws. The best tax agents in Dubai such as Jitendra Chartered Accountants (JCA) assist the business in conducting a review to prepare for the audit. But, Businesses are advised not to wait for the Tax Audit Notification from FTA, but to maintain the required documents/information and compliance with the laws on a day-to-day basis to avoid the last-minute rush with the help of the best tax agents in Dubai such as JCA.