Federal Decree-Law no.7, on Tax Procedures Law, defines a Tax Audit as a process undertaken by the Federal Tax Authority (FTA) to inspect commercial records and/or any information/data in relation to a person who is conducting business. Tax audits are conducted to enable the government to examine whether or not a business is complying with the VAT & Excise law. FTA examines if a businessperson has paid all their liabilities and any tax dues within the given time period through a tax audit. FTA can conduct a tax audit in a businessperson’s office or the premises of the taxable person or any place where that person conducts his/her business (This can also be a place where the entity may keep its records or store its goods), this is as per Article 17 of Tax Procedures Law.
A Detailed Overview: Tax Audit Procedure by the FTA
During a tax audit, FTA can review tax returns and various other information or data of a taxable person, without any reason. FTA can conduct a tax audit for any reason or time. Although, in most cases five days before the audit, FTA does send a notice to the organization (according to Article 17, Tax Procedures Law). Usually, the audit takes place during the FTA working hours (according to Article 19 of Tax Procedures Law). However, under some exceptional cases, the Director-General of the FTA is allowed to conduct a tax audit outside of FTA’s working hours. The organization, tax agents, and their legal representatives are required to provide all the assistance to the FTA authorities who conduct their audit. Auditors can also ask for a re-audit if they find anything suspicious during that tax audit.
How to prepare for an FTA Tax Audit in UAE
Organizations can take the assistance of a tax consultant in UAE before facing a Tax Audit. Having a tax consultant on board can help boost the morale of the organization to face the tax audit. Some suggestions to bear in mind before a tax audit in UAE are:
Tax auditors examine everything related to tax and its transactions, and therefore organizations need to ensure that there are no inconsistencies in any records. Experienced tax consultants in Dubai, UAE can help companies review their systems and assure that their accounting software complies with the VAT accounting requirements.
Review of Tax Calculations:
In order for organizations to comply with the UAE VAT Laws, they have to ensure that their calculations for input and output tax are correct. Majority of the goods and services in UAE have a standard tax rate of 5%, however, some of them are also subject to zero-rated or exempted VAT rates. ITC can assist you in ensuring that your company is VAT compliant.
VAT Returns Review:
Businesses that have registered for VAT must file their returns online through the FTA portal. VAT return filing includes the submission of the value of sales, purchase, output VAT, input VAT, etc. The VAT filing procedure in UAE must be done electronically and in the appropriate boxes of VAT return form within the FTA portal. ITC has some of the best VAT consultants in Dubai, UAE, that can ensure that your business’s returns are filed appropriately. Our Tax Consultants in Dubai can support businesses to record these values incorrect boxes and any other necessary information or data, to be filed in the specific timeframe given by the FTA.
Records that must be maintained for an FTA Tax Audit
A registrant should maintain the following records, and that this must be shown to the 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.
This list is not comprehensive, and FTA may ask for more documents.
Consult with some of the best tax agents in Dubai, UAE to prepare these documents in compliance with the UAE VAT Tax Law.