The UAE Tax Procedures Law (Federal Decree-Law no.7) allows the Federal Tax Authority (FTA) to carry out a tax audit on any person to determine the extent of their compliance with relevant tax laws. Undergoing tax audits doesn’t augur well for a taxable person and they must enlist the assistance of tax agents in the UAE to avoid possible penalties resulting from the FTA audits. An FTA audit in the UAE allows the government to check whether an entity has paid its all liability and collected and submitted all the tax dues to the government within the deadline.
By carrying out a tax audit in the UAE, the FTA also assess whether the company is following certain obligations that apply to their business as per the relevant tax laws. You need to strictly follow the rules and fulfil all the responsibilities to avoid FTA audits in the UAE. However, if the FTA has notified you about a tax audit, it is essential to prepare well with the help of tax agents in Dubai. Read the following article to get to know how the tax agents can help businesses prepare for FTA audits in the UAE.
Tax Audits in the UAE: Timing is Everything
The tax audit will be performed at the place of business of the taxable person or any other place they conduct their business, store goods or keep the records. Once the FTA decides to perform a tax audit on a business, it will inform them at least five days before the tax audit. This means you will get only a short period to prepare for the tax audit. Moreover, the tax audits in the UAE may consume much time, which may affect your business if you have not prepared adequately. Get the tax agents in Dubai by your side to ensure that everything is in order on your part.
Preparation is the Key for FTA Audits in the UAE
It is ideal for businesses to stay compliant throughout their life cycle to avoid FTA’s tax audits in the UAE. However, businesses should always hinge on the worst-case scenarios so that they can face tax audits with confidence. The best way to come clean out of a tax audit is to prepare well. Tax agents in the UAE can help the businesses to perform the following assessment to prepare for FTA audits:
- Make sure all your books and records are in order
- Convert your working files to match FTA audit standards
- Review the previous VAT return submissions to ensure they are free of error
- Review your systems to ensure proper recording of transactions
- Ensure both input and output tax are complying with the UAE VAT Laws
- If errors are discovered, disclose them to the FTA using the appropriate method before being notified about the tax audit
What are the Records to Be Maintained for FTA Audits?
As per Article 18 of the Tax Procedures Law, the FTA has the right to access original records or copies during a tax audit. This means you need to ensure that all of your records are in order before the FTA auditors check them. As per Article 78 of the Federal Decree-Law, businesses need to maintain the following records and present them to the FTA when requested(the FTA may request documents not included in the list for which you can seek the advice of tax agents in Dubai):
- Records of all supplies and imports
- Al tax invoices and alternative documents related to receiving Goods or Services
- All Tax Credit Notes and alternative documents received
- All Tax Invoices and alternative documents issued
- All Tax Credit Notes and alternative documents issued
- Records of disposed of goods or services or goods or services utilised for non-business purposes, and the records showing taxes paid for the same
- Records of goods and services purchased by your company for which input tax was not deducted
- Records of goods and services exported by your firm
- Records of adjustments or corrections made to accounts or tax invoices
- Records of taxable Supplies made or received
- Details of goods imported into the UAE (attach Customs declaration and supplier’s invoices for this)
Early Bird Catches the Worm: Benefits of Preparing Ahead
Tax agents in the UAE advise all businesses to prepare early for successfully clearing an FTA audit. However, many businesses avoid this golden rule, leading to unnecessary penalties and reputation damage. Such businesses must read the following list to get to know the benefits of preparing early for FTA audits in the UAE:
- You can quickly respond to FTA’s questions and request documents
- Minimise time spent on making files to FTA’s audit standards
- Reduce the value of percentage-based penalties by disclosing errors to the FTA in advance of the tax audit
Use the Services of Best Tax Agents in Dubai, UAE
The FTA carries out tax audits in the UAE to assess a company’s level of compliance with tax laws as a taxable entity. Preparing early with the help of tax agents in the UAE is the only way to clear the audit as the FTA will notify you about the audit within five days only. Tax agents in Dubai such as Jitendra Chartered Accountants (JCA) can provide you with VAT health check-up services to save you from being categorised as a non-compliant entity.
JCA’s VAT health check-ups will help you to understand the causes of non-compliance and address them in the past and the future. Our bespoke VAT review will help businesses to identify the areas that require rectification while assuring the accuracy of taxes submitted and compliance with relevant tax laws. However, businesses are advised not to wait for the Tax Audit Notification from FTA. They should, instead, maintain the required documents/information on a day-to-day basis to avoid the last-minute rush.