Value added tax audit in UAE is basically the assessment of the authorities of a company regarding their responsibility being a taxable entity. The audit is conducted by tax authorities in UAE, the (FTA) Federal Tax Authority, whose main goal is ensuring every liability of a taxable entity is paid and every cent due is collected within the given timeframe. The government authority will also assess whether or not a company is following certain responsibilities which apply as per local tax regulations.
Detailed procedure on tax audit in UAE
The FTA will check details that are in an entity’s VAT returns. There’s no specific reason required of the FTA to perform an audit to a company. The tax authority will conduct the audit for any reason and whenever they want. A company will be given a notice, at least 5 days prior to the date of the scheduled audit. The audit notice will contain the audit schedule, involved parties, reason (if any in particular) and- place. The business and the assigned auditor will meet in the set place and time for the process to start. The auditor may require business records, original or copies, then take samples of assets or goods as available.
Take note: an audited party can ask credentials from a tax auditor e.g. professional identification card to determine authority.
The tax audit in UAE has to be conducted within the official working hours of the Federal Tax Authority, unless the FTA General Director states that the audit is to be conducted outside of the business’ regular hours; however, this is only for exceptional cases. A company that is subject to the tax audit and its tax agents and legal representatives are to fully provide assistance to tax auditors for them to complete the task.
When a suspicious activity is found from the tax audit conducted by the auditor, the auditor will order another round of audit for analysis. A company can ask for the copy of the notification as well as other related documents. It also has to be present during auditing procedures if they are conducted outside official places.
What to do to prepare for tax audit in UAE
As a business owner running a taxable entity, it can be stressful to think about the business being audited by authorities. A regulated tax agent in Dubai will be able to help you organize transaction records so when your business is requested for a tax audit by the FTA, you’re already set up in facing the procedure instead of worrying about it.
Below is a list of the types of review which can be done so you are prepared for a tax audit:
- System review – since value added tax or VAT was announced and implemented in UAE during the start of 2018, businesses have made sure that every single department under them is ready in facing a brand new era. An important item to be updated would be the accounting and bookkeeping process of the business. Remember that it has to comply with the local regulations regarding VAT accounting in UAE. A systems review can help ensure that there’s no inconsistency with any recorded transaction.
- Calculations tax review – it’s important for a company to make sure they’re fully compliant to laws via checking calculations of input and output taxes. Calculation has to be done thoroughly and properly while also having experts review them. The current tax rate of the country is five percent. If services or goods fall under exempt tax or zero rated, they are to be treated according and documents had to be retained in order to provide sufficient proof or support.
- VAT returns review – this one is where a regulated tax agent in UAE reviews VAT returns of a business which a business files in order to ensure that the returns are being prepared correctly with the values all properly recorded. The values are to be recorded in the correct boxes while the required information by the FTA in the VAT returns is to be filled in. Also, a tax regulated agent in UAE can help ensure that VAT returns filing is done within the provided timeframe of the FTA.
- Tax due payment review – the correct amount for tax that’s due to the FTA should be paid prior or on the due date. Regulated tax agents based in the country can help make sure that you’re not drawing any attention by the authorities from missing payments of tax due.
It is important for all businesses in UAE that are register for VAT to comply with regulations and supply accurate information to authorities to avoid acquiring fines and penalties. If you want to know more regarding value added tax audit in UAE and how you can prepare your business if it gets audited, call us!