Tax Audit in UAE

A tax audit in UAE will be conducted by the official representatives of the Federal Tax Authority (FTA). The objective of the tax audit is to determine the VAT compliance and to ensure that the tax liability is correctly determined and paid. 

Businesses must prepare themselves for the tax audit by the FTA. Tax audit will verify the liability of VAT through examining the accounting and bookkeeping records and VAT return filings which are maintained by the taxpayer. 

Tax audit will be conducted at the offices of the concerned business or at the place of choice of Federal Tax Authority (FTA). FTA will notify the business at least 5 business days in advance. FTA will conduct tax audit in official working hours.

All the businesses registered under VAT will not be audited. FTA will choose randomly and select the companies that are required to be audited. The decision to audit a company will be FTA’s choice. 

Factors of Tax Audit

Selecting a business for a tax audit lies completely with the FTA’s decision. Certain factors can be considered before selecting a business for a tax audit, such as:

• Large scale businesses
• History of late tax submissions
• The occurrence of incorrect tax filings
• The complexity of a business

VAT Audit in UAE

By conducting a VAT audit, the government will verify that whether the business is following all the VAT laws and implementing VAT as per the regulation of FTA. Through the VAT audit in UAE, FTA will check the VAT returns and VAT refunds submitted by the taxpayer. The purpose of the VAT audit is to make sure that the business is collecting and submitting the VAT to the FTA within the assigned time frame. 

VAT audit will include reviewing and accessing all the financial records of the company along with the bank statements. FTA will ask for the documents in hard copy and soft copy. FTA will check the sales and purchase invoices and review the books of accounts along with the VAT returns submitted to FTA.

VAT Audit Services in Dubai

Businesses who are subject to VAT audit must cooperate and facilitate FTA auditors in every possible way. A taxpayer or the legal representatives of the taxpayer must provide complete assistance to the tax auditor to conduct the audit in a smooth way. If your business receives a notification of VAT audit, you should prepare the following:

• Office is accessible
• Original documents
• Tax invoices
• Financial records such as books of accounts
• The staff of Accounts department and VAT agents
• If the audit is conducted outside the business office then the presence of the relevant person from the business is mandatory at the time of the VAT audit.

If FTA finds out a non-compliance in the tax operations or discovers any violation of the FTA law then heavy VAT fines and penalties will be imposed on a business. The severity of violation or non-compliance might lead to the cancellation of the trade licenses or closing of a company.

Based on tax evasion, the following penalties will be levied on businesses by the FTA:

Penalty of AED 10,000 will implement for not maintaining financial records.

Submission of Incorrect Tax return by the Registrant will be AED 3,000 for the first time and then AED 5,000 in case of repetition.

Failure of the person conducting business to facilitate the work of the Tax Auditor will be AED 20,000.

Failure of the taxable person to submit a VAT registration application within the time frame specified in the tax law will be AED 20,000.

Tax Violations in UAE will also lead to shutting down of the business entirely and the cancellation of the Trade license.  

How Xact Auditing will help?

Xact Auditing will entirely represent your business in front of the Federal Tax Authority (FTA). Our tax experts will ensure that everything is in line with the FTA’s law and regulation. Let Xact handle all your VAT aspects and save your business from unnecessary fines and penalties. 

Xact Auditing is providing a VAT health check to ensure VAT compliance. We highly recommend that all VAT registered businesses must conduct a VAT health check at least twice a year to ensure that the business is compliant with updated tax laws and regulations. Xact is providing the best VAT services that are in line with the standards and rules of the FTA. For all kinds of services related to VAT, Contact Xact!

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