In our previous articles we updated you on introduction of VAT in the UAE and how will the new tax rules affect your business. Now we will explain about tax audit in the UAE so that you get familiar with terminology and also keep up with the era of taxation in UAE.
What is a tax audit?
A tax audit in UAE is basically a government’s assessment of an organization about its responsibility as a taxable entity. This kind of audit is performed by the Federal Tax Authority (FTA) to check that every liability is paid and every tax due is collected and given to the government within the timeframe provided. The government also ensures whether a company is fulfilling certain responsibilities that apply to their business as per UAE tax laws (VAT Law, Excise Tax Law, etc.).
Here’s the detailed procedure of tax audit in the UAE
The concerned party/business/person in UAE will file their tax returns on the FTA portal according to the schedule.
The FTA authorities will examine the returns and other details. There can be a no specific reason for the FTA to conduct an audit of a business/taxpayer. They can perform it for any reason or whenever they want.
Concerned party will be issued a notice, minimum 5 days before the scheduled audit date. The notice will contain details about audit schedule, place, involved parties and reason if there is something particular.
Note: The audited party has the right to request for the credentials, such as professional identification cards, from the tax auditors in order to check their authority.
The auditor/s and the taxpayer will gather at the scheduled place at the scheduled time and the process will start. The auditor can ask for original/copies of business records and may take samples of goods and other assets if available at the place during that time.
The tax audit has to be conducted during the official FTA working hours, unless the Director-General chooses to carry out the audit of a business after regular hours, in an exceptional case.
The taxpayer/ business subject to a tax audit, along with their legal representatives and tax agents, are obligated to offer complete assistance to the auditors carrying out their task.
If anything doubtful or wary is found in the result of the audit that can have an impact on tax return, the authority may order a re-audit for additional analysis.
How to be prepared for an audit?
1. Review of the system
Tax has been announced in the UAE to be commenced from January 1, 2018. Business in Dubai and across UAE will now have to ensure that every department is ready to take on the new change.
One of the key considerations is update of company’s accounting software. Same should comply with the laws related to VAT accounting. Accounting systems should be reviewed so that there is no inconsistency with the recorded transactions.
2. Review of Calculations Tax
Companies in UAE must make sure that they are complying with the laws by checking that the calculation of both output and input taxes is accurate. As a general rule, the tax rate is at 5% only. Any goods or services that belong to zero-rated and exempted tax category should be treated as it is with documents for support.
3. Review of VAT returns
A tax consultant will analyze the VAT returns that need to be filed by companies to ensure that returns are prepared in the correct manner, values are written in their correct places and required information is completely provided.
4. Review of payment of Tax Due
The exact amount of tax due must be paid on or before the due date. A tax audit reviewer will make sure that you are not drawing any negative attention from FTA by missing the timeframe of tax payment to the UAE government.
KWSME provides tax consultancy in UAE. We have a team of experienced professionals who have VAT Certificates, showing their expertise in the field. Our tax consultants also assist in reviewing your company for an upcoming Dubai Tax audit. This will ensure that you are completely abiding by the UAE Tax Laws.