Less than two years ago VAT was introduced in the UAE. Within this time already 15 public clarifications have been published by the Federal Tax Authority (FTA). There are still a number of questions with regards to the tax audit from different types entities. Let’s shed some light on the matter. What is the Tax Audit? What do you need to do to be properly ready for it?
What is the Tax Audit?
To ensure that a company is legally compliant the FTA reviews all financial records (accounting, bookkeeping and filing of VAT returns) of the company. The audit will be conducted at the office of the company or at another location at the discretion of the FTA.
A Tax auditor should notify a company 5 working days before the official audit. In case the Tax Auditor has grounds to believe that the company is involved in the tax evasion, the Tax Auditor can enter the company’s office and temporarily suspend the work for a period of up to 72 hours without any notification.
As per Cabinet Resolutions No (40) of 2017 on Administrative Penalties for Violations and Tax Laws in the UAE, the person responsible of the audit from the company’s side must assist the Tax Auditor in any requests related to business activities of the company. Failure to comply with this rule could subject to a penalty of AED 20,000.
Under the Article 3 of Cabinet Decision No. (36) of 2017 on the Executive Regulation of Federal Law No. (7) of 2017 on Tax Procedures, every Taxable person is required to hold and maintain tax records for a period of 5 years after the end of the Tax period.
Tips and hints for a Tax Audit:
- Review Tax Calculations
- Review reports and VAT returns regularly
- Review payments of Tax Due
- Make sure that your Accountant is following the proper guidelines and requirements issued by the FTA