How to Prepare for VAT Audit in UAE?
VAT Audit in UAE is the review performed by the Federal Tax Authority (FTA) in order to assess the VAT liability and review the records maintained by the taxable person to ensure that they are in compliance with the provisions of the UAE VAT Law.
The FTA has started the process of VAT Audit in UAE wherein the authority will ask the businesses to submit the information which will be verified with the VAT returns submitted. Also, the authority might review the relevant supporting documents like tax invoices, credit notes, export documents, contracts etc. to ensure compliance with the UAE VAT Law.
The FTA may choose any business or taxable person for VAT Audit in UAE based on various factors observed through the procedures like a review of VAT returns submitted, Vat refund application processes, Voluntary disclosures submitted, clarifications provided etc. or even when the authority receives or identifies sufficient reason to believe that a Tax Audit is required on a taxable person.
Hence, the FTA may start the VAT Audit in UAE when it has reason to believe that a taxable person needs to be audited.
How to prepare for VAT Audit in UAE?
One of the key areas in the audit will be a review of the accounting system. The accounting system should be capable of generating and recording the tax invoice and the credit notes. Also, need to ensure that the documents can be maintained at least for 5 years/15 years. The accounting system should also be capable of generating the VAT Returns, reports and documents.
Timely submission of VAT Returns on or before 28th following the tax period is essential. Further, all the transaction must be classified and recorded properly. Also, ensure no errors are made while submitting the returns. If any vat payable is missed out adjust in the subsequent returns and if the payable is more than AED 10,000/- make the voluntary disclosure on time.
Make sure that proper Tax invoices are issued with the proper format and contents as listed in Article 59 of the Executive Regulation of the UAE VAT Law. For the tax, credit notes make sure that there are the proper reason and reference number and should meet all the requirements of Article 60 of the Cabinet Decision No. (52) of 2017 Executive Regulation.
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Proper reporting of Output tax
Ensure that all the standard rated transactions are taxed as per the requirements of the UAE VAT Law. Make sure that the export of goods is supported with proper supporting documents. If no documents are available, make sure to obtain it or tax at the standard rate.
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Proper claiming of Input Tax
Ensure that input is properly claimed, and the tax invoices received are in compliance with the provisions of the law. Special care must be taken on the compliance of the provisions related to the recovery of input on entertainment-related expenses or personal expenses.
5 Circumstances that lead to FTA’s VAT Audit in UAE Generally, FTA’s VAT Audit in UAE
is not initiated against all the business unless there is some reason to decide or start a tax audit. Some of the reason for the authority to do so can be any of these listed below.
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Late VAT Registration
If you Fail to apply for VAT registration within the timeframe specified by the VAT Law, then it can lead to one of the reasons in future for the Tax Audit.
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VAT Deregistration
To ensure that the company has deregistered on proper grounds and applied for the deregistration within the timeframe mentioned in the law, the authority can initiate for Tax Audit.
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Incorrect Tax Returns
If any wrong amount of tax was charged or tax is incorrectly charged, then it can lead to errors in the tax returns.
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Failure to issue Proper Tax Invoices and other supporting documents
if the taxable person fails to issue tax invoices as per the provisions of the Law and fails to provide any such relevant information about the transactions.
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Tax Evasion
If the taxable person intentionally reduces his payable tax or does not disclose all the income in the VAT Returns can be subjected to FTA audit if the authority finds so. Once the VAT Audit in UAE is initiated, the taxable person will have to provide all the relevant information to the FTA. If the authority finds any documents missing or any tax evasion, then it can penalize by levying the penalties.
What are the Relevant documents to be kept for VAT Audit in UAE?
- All Tax invoices raised for the supplies of goods and services
- All tax credit notes issued and received for the supply of goods and services.
- All tax invoices received for which input is claimed.
- Supporting documents for the export of goods
- Records for import of goods into UAE, like the custom declaration.
Further, the Federal Tax Authority may ask any such records or document in addition to some specified in the above list.
As discussed above it will be important for a taxable person or businesses to be prepared for Vat Audit in UAE and to ensure VAT compliance. It is also recommended to adopt policies or practice to get audited with help of a tax agent like us where we will be reviewing your transactions and supporting documents to identify any non-compliance and to guide you for the rectification of same. The service we offer for the same is Pre- Tax Audit or VAT Compliance review.
Emirates Chartered Accountants Group is a Registered Tax Agent with the Federal Tax Authority under Emirates International Chartered Accountants Group. We are happy to support and guide your company for any of the above-mentioned requirements. Our Tax Professionals are highly qualified and well versed with the UAE Tax Law with the practical implementation of VAT in UAE and Bahrain. We understand that every business is different from the other. Hence, each of our services is tailored as per your business needs.
Looking for TAX Services in the UAE? We are happy to assist.
For Tax Services in Dubai:
Mr. Pradeep Sai
sai@emiratesca.com
+971 – 556530001
For Tax Services in Abu Dhabi:
Mr. Navaneeth
nav@emiratesca.com
+971 – 558892750
For Tax Services in Northern Emirate (Sharjah, Ajman, RAK, Fujairah)
Mr. Praveen
praveen@emiratesca.com
+971 – 508873115
Feb 29,2024UAE Corporate Tax Registration
