13 Aug 2025
In the UAE, VAT compliance is about accuracy, documentation, and staying ahead of audit triggers. With the Federal Tax Authority (FTA) ramping up enforcement in 2025, submitting a clean VAT return is your best defense against costly penalties and audit disruptions.
Why Clean VAT Returns Matter
FTA audits can be conducted anytime within five years of the tax period—or even up to nine years if a voluntary disclosure is submitted or a tax evasion case arises. Even a small error in your VAT return can raise red flags, prompting investigations and financial penalties.
A clean return signals robust internal processes, proper documentation, and full compliance. More importantly, it protects your business reputation and ensures continuity without unnecessary regulatory friction.
What Happens When It’s Not Clean?
Incorrect VAT returns, failure to maintain required records, or delays in voluntary disclosures can trigger severe consequences:
-
Administrative fines ranging from AED 1,000 to AED 50,000.
-
Fixed penalties for incorrect filings or missing documents.
-
Percentage-based penalties up to 50% of underpaid tax, plus 4% monthly interest.
-
Audit-related penalties, including AED 20,000 for non-cooperation.
The FTA also has the authority to seize records, inspect business premises, and issue estimated tax assessments if documentation is found lacking during an audit.
Stay Ahead of the Curve
Avoiding future penalties starts with simple but essential actions today:
-
Ensure timely and error-free VAT return submissions.
-
Maintain complete supporting documentation (sales, purchases, bank records).
-
Retain VAT records for at least 5 years (and 7 years for real estate).
-
Submit voluntary disclosures promptly if discrepancies are found.
-
Cooperate fully if selected for audit—FTA provides a 10-business day advance notice.
Whether you're a small business or a large enterprise, proactive compliance is always more cost-effective than reactive correction.
Need Help Ensuring Your VAT Returns Are Audit-Ready?
At AMCA, our tax experts help businesses maintain airtight VAT records and navigate FTA audits with confidence.
