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Tax Audit in the UAE

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In order to see the accuracy of a person's VAT liability, it is the tax audit that verifies it by reviewing various documents that the taxpayer holds. The taxable entity's duties are being assessed in the tax audit; similarly, it is being reviewed to see if they are fulfilling their responsibilities in compliance with the tax laws.

The Federal Tax Authority (FTA) is accountable for conducting the taxable entity's tax audit, ensuring that, within the specified timeline, all the liabilities are charged, collected, and given to the government. The taxpayer will be issued with a prior notice of an audit.

The Tax Audit and its Procedures

The Federal tax Authority oversees the company’s returns and other details. They have the right to enter the company’s premises while conducting VAT or TAX Audit. In performing the TAX Audit, the FTA may do it in no particular time. Be that as it may, a prior notice will be given to the company, at least five days before the scheduled audit date.

Along with the scheduled audit date (should be conducted during the official FTA working hours), the notice also comprises the venue, parties to be included during the Tax Audit, and the reason (if any) for tax assessment.

If the FTA has enough grounds to believe that the company or a single person is involved in Tax Evasion, which might impact the tax return, the company may be temporarily closed to do a re-audit for further analysis.

The Tax Audit's Preparation

  • Seek for Assistance from your Tax Consultants To ensure that the company will be ready for the checking of the tax audit, a tax consultant can provide assistance to all the companies to set up and similarly, to prepare all the documents needed for the tax assessment.
  • Organize your records Make sure that all the necessary documents, which will eventually be requested to present during the assessment, are ready. Remember that poor records may result to penalties.
  • Prepare the following
    • Review of the system: Make sure that the accounting software is up-to-date and should be compatible with the requirements set by the Federal Tax Authority.
    • Review of Calculation of Tax: The calculation of both output and input taxes of the company shall comply with the laws set by the UAE – the rule states that the tax rate is at 5% only.
    • Review of VAT Returns: The returns shall be properly checked by the tax consultant, guaranteeing that all the values are properly recorded, and all the information are included in it.
    • Review of the Payment of Tax Due: All the tax payment must be paid accurately on or before its due date.

The Penalties Correlated with Tax Audit in the UAE

The non-compliance with the tax laws will probably result to having penalties. The Ministry of Finance (MOF) have issued a set of penalties to those who is found guilty of non-compliance. The following are as follows:

  1. Non-maintenance of financial records – AED 10,000
  2. Submission of incorrect tax return by the Registrant – AED 3,000
  3. Repetition of submitting incorrect tax return – AED 5,000
  4. Failure of the person conducting business to support the work of a Tax Auditor – AED 20,000
  5. Failure of the taxable person to submit a registration application within the time frame specified in the tax law – AED 20,000

These violations of tax laws can also lead to imprisonment of the authorized signatory and can be considered a criminal offense.

How can we give you help?

As VAT Consultants in UAE, we will be extending our helping hands to your company in terms of preparing all the obligations for your Tax Audit. The skills, experiences, and knowledge that our experts have can definitely help your company with your taxable transactions while complying with the VAT laws. They make sure to offer ways on dealing with your unavoidable issues.

In our decade long presence, we have served many companies in the public and private sector. We are an approved and licensed tax agency under the Federal Tax Authority (FTA).