Tax Auditing
Tax Auditing Services in UAE
As per the Tax Procedures Law (Federal Decree-Law No. 7), a tax audit is a procedure conducted by the Federal Tax Authority (FTA) to examine the commercial records, information, and data of taxable persons conducting business in the UAE. The primary objective of an FTA tax audit is to ensure that the taxable person complies with the UAE VAT Law and Tax Procedures Law.
Through tax audits, the FTA ensures that:
All tax liabilities are properly calculated.
The correct amount of VAT is collected.
Taxes are paid and submitted to the government within the prescribed deadlines.
To support companies in this process, tax agents in the UAE registered with the FTA offer both pre-audit and post-audit support. This ensures businesses remain VAT compliant and avoid penalties. Importantly, companies should only engage FTA-registered tax agents and avoid unregistered consultants.
Al Fakher Accounting is a registered VAT consulting firm in the UAE that provides expert tax auditing services in Dubai and across the UAE. Our experienced tax professionals assist businesses in preparing for FTA tax audits through pre-audit checks, compliance reviews, and post-audit support. It is always advisable for businesses to proactively hire qualified tax agents to ensure they are fully prepared for an official tax audit.
Process of TAX Audit by the Federal Tax Authority (FTA)
The tax audit process in the UAE is governed by the Tax Procedures Law (Federal Decree-Law No. 7). Tax audits are conducted by officials assigned by the Federal Tax Authority (FTA), who are responsible for examining tax returns, records, and any other information related to taxable persons or entities in the UAE.
Key Points of the Tax Audit Process:
FTA’s Authority: The FTA has the right to conduct a tax audit at any time and for any reason a specific cause is not required.
Advance Notification: According to Article 17 of the Tax Procedures Law, the FTA typically provides a notice at least five days before the audit date.
Working Hours: Per Article 19, tax audits are generally conducted during the FTA’s official working hours. However, in special cases, the FTA Director-General may approve audits outside of normal hours.
Access & Assistance: During the audit, the company management, legal representatives, and registered tax agents are obligated to provide complete cooperation and access to the FTA officials.
Re-Audit Possibility: If irregularities or suspicious transactions are discovered, the FTA auditors may conduct a re-audit to further investigate.
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Records to be Kept for Tax Audits in the UAE
The taxable entities are required to keep certain records to facilitate the tax audit. Article (78) of Federal Decree-Law on Value Added Tax mandates the tax registrants to keep the following records and present them to the tax auditor during the audit:
- Records of all supplies & imports
- Tax invoices and documents related to receiving goods & services
- All tax credit notes and documents received
- All tax invoices and documents issued
- Records of goods and services that were disposed of for matters unrelated to business and records showing tax paid to the same
- Records of Goods and Services purchased and for which the Input Tax was not deducted.
- Records of exported Goods and Services.
- Records of adjustments or corrections made to accounts or Tax Invoices.
- Details of Goods imported along with Customs declarations and Supplier Invoices
1. Right to Enter Premises
Under Article 18, tax auditors have the authority to enter any location where the audited business operates, stores goods, or maintains records. If required, auditors can temporarily shut down the premises for up to 72 hours—without prior notice—if tax evasion is suspected or if there is a potential hindrance to the audit process.
2. Right to Obtain & Seize Assets
Also under Article 18, auditors can request original documents or copies and may take samples of stock, equipment, or other assets. Where necessary, these samples can be seized for further investigation.
3. Right to Audit New Information
Auditors may assess any newly surfaced information discovered during the audit process if it may impact the audit outcome. This must comply with both the Tax Procedures Law and its Executive Regulations.
Major Areas Reviewed During Tax Audit in the UAE
1. Accounting Software & Systems
FTA expects businesses to use compliant accounting software that can generate reports and maintain records as specified in Article 2 of the Tax Procedures Law. Businesses can consult VAT specialists to ensure the software aligns with FTA requirements.
2. Output Tax Review
Auditors verify that zero-rated, exempted, and standard-rated (5%) taxes are correctly applied to taxable supplies. For imports, they also confirm correct application of the reverse charge mechanism.
3. Input Tax Review
Auditors inspect whether input tax is claimed only on eligible expenses and properly documented with valid Tax Invoices and TRNs. Input tax should not be claimed for exempt supplies or disallowed categories, like entertainment expenses.
4. VAT Returns Review
Auditors reconcile filed VAT returns with actual accounting records. This ensures accuracy and completeness. Prior to submission, businesses are advised to have their returns reviewed by VAT consultants for compliance.
Notification of Tax Audit Results
As per Article 17, the FTA must inform businesses of the final outcome of the audit within 10 business days of completion. Businesses also have the right to access the documents and data that the FTA relied on in assessing any due taxes.
Why Hire FTA-Registered Tax Agents
Since FTA audits are official and can carry serious financial consequences, it is essential for companies to hire FTA-registered tax agents.
Al Fakher Accounting Your Tax Audit Partner in UAE
Al Fakher Accounting is a trusted and FTA-registered tax consultancy firm in Dubai, offering full-scale pre-audit, during-audit, and post-audit support. Their tax experts provide:
Transaction advisory
Document & records preparation
Risk & exposure analysis
VAT return reviews
Representation during audits
Guidance on corrective actions post-audit
With extensive experience in UAE tax regulations, Al Fakher Accounting ensures your business is fully compliant, prepared, and protected during any FTA tax audit.