When the FTA in the UAE does a tax audit, they carefully check a company’s money records, accounting papers, and tax forms to make sure the company has figured out the right amount of tax they should pay and they make sure that company is following all the rules.
The FTA can decide to do an audit on any business for any reason, not just when there’s a problem. To be ready for an audit, companies should be able to answer questions within specified time frame. They need to correctly figure out how much tax they owe for different kinds of transactions, like regular ones, special low-tax ones, and ones that don’t have tax. Companies should also keep track of their money records and make sure they match the tax forms they send.
Bestax Chartered Accountants (CA) is a certified Consulting Firm, offering Auditing Services in Dubai including Tax audit services. Engaging their expertise allows businesses to proactively prepare for FTA tax audits by enlisting tax agents for essential pre-tax auditing processes to ensure that whether you are well-prepared and complying all the applicable regulations.
What is a tax audit?
Examination of tax return and information provided in return by tax authorities to make sure that reported information is correct. The process is carried out by the FTA to verify proper payment of liabilities and timely submission of taxes to the government. Further, incorrect data in return can trigger an audit.
- The Tax Procedures Law (Federal Decree-Law no. 7) defines a Tax Audit as a process done by the Federal Tax Authority (FTA).
- Tax audits in the UAE are carried out by the FTA to check the records and information of a Person doing Business.
- The aim of a tax audit is to ensure that a business is following the tax laws, especially VAT and Excise Tax Laws.
- The FTA checks if the business has paid all the taxes, it should and done so within the required time.
- The audit can happen at the FTA office, the business’s place, or where they keep records or goods.
How to get ready for the audit?
Engaging a tax consultant who can provides you with Expert Audit Services in Dubai and will help you in establishing and maintaining your organizational readiness, ensuring your company is well-prepared to address any potential tax audit requests from the FTA, improving concerns associated with such audits.
The following outline describes the types of assessments conducted to equip you for an forthcoming audit:
Ever since the introduction of taxes in the UAE starting from January 1, 2018, companies have been making sure that all their departments are well-prepared for this new phase. One aspect is updating their accounting software so that rules for VAT accounting can be fulfilled. Checking and evaluating the systems will make sure that there are no mistakes or differences in the way transactions are recorded.
Tax Calculation Scrutiny
Companies need to make sure they follow the rules by checking that they have done the math right for both the money they get from taxes (output) and the money they spend on taxes (input). Remember, the tax rate is 5%. Also, anything that doesn’t have a tax or has a lower tax should be treated as such, but you should keep papers to prove it.
VAT Return Review
A tax consultant will look at the papers where companies show how much tax they’ve collected and paid through VAT return. They’ll make sure everything is written in the right places in return, and all the important details are there. They’ll also check that these papers are given to the government on time, as the government wants them.
Tax Payment Audit
You must pay the right amount of tax before the deadline. A tax consultant will help you avoid any problems with the government agency (FTA) by making sure you don’t miss the tax payment deadline.
Checking the systems will make sure that everything is correct and consistent with the recorded transactions.
Documentation Requirements for Tax Audits in the UAE
Taxable entities operating in the UAE are obligated to maintain specific records that facilitate the tax audit process. According to Article (78) of the Federal Decree-Law on Value Added Tax, tax registrants are mandated to retain the records and Tax Audit Services in Dubai can help you in preparing and presenting the following record to tax auditors during the FTA tax audit:
- Comprehensive Records of Supplies and Imports: Detailed documentation of all supplies and imports made by the entity, providing a comprehensive overview of its commercial activities.
- Tax Invoices and Receiving Documents: Maintenance of tax invoices and documents associated with the receipt of goods and services, substantiating transactions and aiding in the verification of input tax claims.
- Tax Credit Notes and Receipt Documents: Preservation of all tax credit notes and documents received, facilitating accurate reporting of adjustments and credits within the tax framework.
- Issued Tax Invoices and Documents: Archiving of tax invoices and related documents issued by the entity, offering transparency and validation of transactions conducted.
- Records of Non-Business Disposals: Documentation pertaining to goods and services disposed of for purposes unrelated to business operations, along with records reflecting the applicable tax payments.
- Records of Un-deducted Input Tax: Detailed records of goods and services acquired for which input tax was not deducted, ensuring comprehensive reporting of tax liabilities.
- Records of Exported Goods and Services: Maintenance of records that outline goods and services exported by the entity, in alignment with international trade regulations.
- Adjustment and Correction Documentation: Records detailing any adjustments or corrections made to accounts or tax invoices, ensuring accurate reporting and compliance.
- Details of Imported Goods: Comprehensive information on imported goods, supported by customs declarations and supplier invoices, validating the accuracy of input tax claims.
Tax Agents Registered with FTA in Dubai, UAE
- Be cautious of people pretending to be tax agents in Dubai to avoid scams.
- Businesses should pick tax agents who are registered with the FTA (Federal Tax Authority).
- The FTA keeps a special list for tax agents, with details about each one’s behavior.
- According to Article 13 of the Tax Procedures Law, only people on this list and licensed by the Ministry of Economy can work as tax agents in the UAE.
In a nutshell, Professional Internal and External Audit Services in Dubai specially related to tax audits play an important role in ensuring legal compliance, financial accuracy, and transparency in business operations. You can minimize your burden by engaging experts to prepare the audit documents, and make a complete examination before Tax authorities. Partnering with registered tax agents like Bestax further enhances your system and records before legal tax audit, enabling businesses to navigate the complexities of the UAE’s Tax Audit compliances effectively.