VAT Audits in the UAE


Strategic Steps to Prepare for UAE VAT Audits: Best Practices for  Businesses | JAXA, Auditing Company in Dubai, UAE

A VAT audit is a detailed evaluation undertaken by the FTA to ensure the correctness of a business’s VAT declared, paid, and recovered. This procedure include reviewing records, returns, and other papers to determine that the business has met VAT obligations. The major purpose is to guarantee that all tax liabilities are settled, and that all owed taxes are collected and submitted to the government within the term specified.

During a VAT audit, the FTA may require that firms present different business papers, which will be compared to the information provided in VAT returns or other disclosures made to the FTA.

When Does the FTA Conduct VAT Audits?

Initially, the VAT Decree Law gave the FTA the option to perform a VAT audit within five years following the conclusion of the relevant tax period. However, from January 1, 2023, the insertion of Article 79bis to the UAE VAT Decree-Law permits the FTA to prolong this time by a further four years. The FTA may inform enterprises of an audit before to the end of the first five-year term.

The FTA can issue a VAT audit notification for no apparent reason. This notification, which is delivered at least five days before the scheduled audit date, includes information about the audit schedule, location, parties participating, and, if applicable, specific reasons for the audit. The audit process begins with a meeting between the auditors and the company at a set time and location.

VAT Audit Procedures

The FTA can undertake VAT audits in two primary ways:

Remote and Desk-Based Audits: These are initially prioritized in areas where system data and documentation are largely evaluated. If the paperwork presented is not adequate, the FTA may conduct an onsite audit.

Onsite audits: Conducted at the company’s location if additional investigation is necessary.

Documents Requested by FTA

Businesses normally have five working days to produce the following papers or information:

  • Transaction listings in the FTA’s specified format.
  • Various reconciliations are used to compare returns to financials, including revenue and VAT ledger reconciliation.
  • Financial statements that have been audited or are prepared by management.
  • Sample paperwork for many types of transactions, such as customs clearance documents for the export of products.
  • Document formats include tax invoices and tax credit notes.
  • Stock movement and verification reports.
  • Any additional documentation considered essential by the tax auditor.
  • Preparing for a VAT Audit
  • To guarantee a seamless audit preparation, taxpayers should keep the following papers ready:
  • Tax invoices and papers relating to the products and services offered.
  • Customs declarations and departure certificates are examples of documents used for exporting goods.
  • Documents for the import of goods and services, such as supplier invoices and customs declarations.
  • Tax bills for goods and services on which VAT is claimed.
  • I received tax credit notes and alternative documentation.
  • A prepared transaction list of goods and services received and delivered in the format recommended by the FTA.
  • Revenue and VAT ledgers are reconciled for each tax period.

Additional Precautions

  • To prepare for a VAT audit, firms should regularly examine and audit their accounting software, internal controls, and invoicing processes to guarantee compliance with VAT regulations.
  • Before submitting VAT returns, be sure to thoroughly review them.
  • If VAT returns are produced in-house, have external experts analyze them on a regular basis.
  • Stay up to date on changes in tax regulations and make any required updates to their systems.

Potential Results of a VAT Audit

  • A VAT audit may result in assessments and penalties for non-compliance or unpaid taxes.
  • If new concerns are discovered, more comprehensive measures will be implemented.

However, firms that plan carefully and thoroughly study their returns can considerably improve their capacity to manage an audit efficiently.

The advantages of Preparing for a VAT Audit

Preparing for a VAT audit can have various advantages:

  • Minimizing the resources required to collect appropriate documentation once the audit begins.
  • Complete the audit more quickly, avoiding deadline extensions and VAT refund delays.
  • Identifying, correcting, and freely sharing any problems discovered during preliminary document inspection.
  • Possible decrease in penalty.

Conclusion

While a VAT audit may appear frightening, careful planning and a proactive approach may make the process easier and more manageable. Businesses can manage VAT audits with confidence and efficiency if they understand the procedures or take services from vat consultant in dubai , have required papers on hand, and are in compliance with VAT legislation.