How to Navigate Corporate Tax Audits in the UAE: Tips for a Successful Outcome

Businesses in the UAE must fully comply with tax laws. The FTA audit process helps taxpayers better understand and meet their obligations and helps maintain public confidence in the fairness and justice of the UAE tax system. If you’ve been selected for a random FTA tax audit or want to ensure you’re ready for a UAE tax audit, information on how to start your tax audit preparation is here.

Corporate Tax Audit in the United Arab Emirates

An official Federal Tax Authority (FTA) representative will conduct tax audits in the UAE. A tax audit determines VAT compliance and ensures that tax obligations are correctly identified and paid. Moreover, Tax auditors in UAE will check the information on the company’s books and records, including the following:

  • Business records include invoices, bank statements, lease records, contracts, receipts, ledgers, and bills.
  • Information already in the FTA, e.g., property details, tax returns lodged
  • Personal records of company directors, such as mortgage documents, credit card statements, and bank statements
  • Adjustments made by an accountant or company accountant for tax purposes

During the audit process, auditors in Dubai can spot issues. When this happens, the employee will discuss each issue with you. You can also raise any concerns with the auditors.

How is a Tax Audit conducted?

An official or FTA-licensed auditor will send you a notification. This can be by telephone, email, and written notification. Before commencing your UAE Corporation Tax audit, you will receive important details such as the time, location, and audit date. Typically, audits take place in your office or workplace. It can also be at your representative office if you choose to be represented by a reputed audit firm in Dubai, UAE.

Upon arrival, the auditor will present you with a valid identification document and begin the audit. Onsite tax audits in the UAE often allow administrator issues to be resolved promptly to minimize delays and disruptions to your business operations. Tax audits will be carried out at the respective business office or a location chosen by the Federal Tax Agency (FTA). FTA will notify businesses at least five working days in advance. Additionally, the Authority will conduct tax audits during official business hours.

Not all businesses registered for VAT will be audited. FTA will randomly draw and select which companies to audit. The FTA will choose the company’s audit decision.

Preparing for a tax audit in the UAE 

Companies must prepare for the tax audit of the FTA. A tax audit will verify VAT liability by examining the taxpayer’s accounting and bookkeeping records and the VAT return documents. Dubai tax advisors can help companies organize when they need to audit FTA taxes. Following the guidance of professional consultants will enhance the confidence of companies facing tax inspections in the UAE. Below are some great tips to help companies prepare for tax audits in the UAE.

 System audit

Since tax auditors review all tax-related transactions, companies must ensure no record inconsistencies. With the help of experienced tax advisors and consultants in Dubai, UAE, firms can audit their systems to ensure transactions are properly recorded. Furthermore, businesses must ensure that their accounting software complies with VAT accounting requirements.

Account tax audit

Firms must focus on calculating output and input taxes to ensure compliance with VAT laws UAE. The standard tax rate in the UAE is only 5%, and many goods or services are subject to zero or no VAT rates, which should be supported by adequate documentation. Consult the VVAS team to ensure you correctly comply with UAE VAT laws.

Audit of VAT returns

VAT-registered companies are required to file VAT returns online through the FTA Portal. VAT return documentation consists of submitting sales, purchases, output tax, VAT, etc., online in the FTA Portal VAT return boxes. With the help of the best VAT consultants in Dubai, companies can ensure that their returns are filed accurately. Moreover, tax advisors in Dubai can help companies get value in the right boxes and provide the required information within the timeframes stipulated by the FTA.

Overdue tax audit

The correct tax due must be paid on or before the due date. A tax advisor will ensure you do not attract negative attention from the FTA for missing deadlines to pay taxes to the government.

Tax Audit Schedule

Not all taxable companies are subject to audit. There is no specific calendar for the frequency of audits. The task of the FTA is to select companies for audit from time to time. Furthermore, it is up to the FTA to decide whether to conduct a full company audit. The matters needing attention when choosing a company for tax audit include the following points.

  • Company size and complexity
  • Business Compliance Record
  • Overdue deposits on the rise
  • Rendering errors, such as ads

After an FTA auditor examines your company’s records, any of the following may occur:

Correct assessment: If the UAE auditor finds all his assessments accurate, no corrections should be made. You will receive a completion letter informing you that the tax audit is complete.

Tax Refund or Tax Payment: If auditors in Dubai, UAE, find that your declaration was wrong and needs to be reassessed, you will be entitled to a tax refund, or you will have to settle the tax owed. You will receive a formal letter of recommendation stating the reasons for the reassessment.

If you disagree with the FTA proposal, it is best to hire an audit firm in Dubai, UAE, to contact the tax authorities and explain why they decided to reassess the issue. Furthermore, the auditing firm in Dubai will collect the supporting documents and submit them with the appeal. You will also be assisted in considering your explanation and answering any questions and concerns the FTA may have about the proposal.

How long does a tax audit in the UAE take?

The length of time for a UAE tax audit depends on several factors, including the status of your company’s records, the scope of the tax audit, possible delays due to missing records, and consultations with other FTA professionals.

Additionally, Dubai audit company’s good track record and assistance will reduce the time it takes for your company to conduct a tax audit in the UAE.

Records to keep for Tax Audits

To successfully run a tax audit, registrants must keep the following records available to the Federal Revenue Service on request:

  • Records of all supplies and imports
  • Invoices and tax documents related to the receipt of goods and services
  • All tax credit notes and documents received
  • All invoices and tax documents are issued
  • Records of goods and services disposed of for non-commercial matters and records showing taxes paid
  • Records of purchases of goods and services not deducted from income tax.
  • Records of exported goods and services.
  • A record of adjustments or corrections made to financial accounts or invoices.
  • Import cargo details with customs declaration and supplier invoice

This list must be completed, but the FTA may require additional documentation. Consult the best tax agent in Dubai to prepare documents according to tax laws.

Final thoughts

A corporate tax audit ensures that the company pays the correct taxes and complies with the UAE Federal Tax Authority (FTA) regulations. Regular audits increase credibility and accuracy. Overall, audits are:

  • An important tool for ensuring a sound financial position.
  • Reducing the risk of fraud.
  • Providing helpful advice to businesses.

However, companies not complying with tax regulations may face corporate tax penalties or legal action.

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