TAX Auditing Services
As per the Tax Procedures Law (Federal Decree-Law No. 7), a tax audit is a process carried out by the Federal Tax Authority (FTA) to examine the commercial records or any information or data of taxable persons conducting business in the UAE. The FTA conducts the tax audit to ensure that the taxable person is complying with the provisions of the UAE VAT Law as well as the Tax Procedures Law.
By conducting a tax audit, the FTA ensures that the taxable person has paid all liabilities and that every tax due is collected and provided to the government within the given time frame.
Tax agents in the UAE who are registered with the Federal Tax Authority assist companies with pre-audit and post-audit support to ensure VAT compliance. Businesses should avoid approaching tax agents who are not registered with the FTA.
Al Fakher Accounting is a registered VAT consulting firm offering tax auditing services in Dubai and across the UAE. It is always advisable to be prepared for an FTA tax audit by hiring professional tax agents to conduct pre-tax auditing.
Process of TAX Audit by the Federal Tax Authority
The officials entrusted by the Federal Tax Authority (FTA) are responsible for conducting tax audits in the UAE. The FTA’s tax auditors will inspect the tax returns and other related information while conducting a tax audit in the UAE. As per the Tax Procedures Law, the FTA can carry out the tax audit for any reason at any time.
Even though the FTA doesn’t require a specific reason to conduct tax audits in the UAE, the Authority usually sends a notice to the taxable person or business at least five days before the scheduled date, as per Article 17 of the Tax Procedures Law. According to Article 19, a tax audit is normally conducted during the normal working hours of the FTA. However, the FTA Director-General can authorise tax audits outside the Authority’s working hours in exceptional cases.
The Tax Procedures Law requires the company, their legal representatives, and tax agents in Dubai, UAE to provide full assistance to the FTA tax auditors. The tax auditors can initiate a re-audit if they find irregularities or suspicious information during the audit. To ensure compliance, companies can seek the advice of registered tax agents in Dubai, UAE. Al Fakher Accounting provides expert pre-audit and post-audit support to help businesses remain compliant and audit-ready at all times.
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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 the Federal Decree-Law on Value Added Tax mandates that tax registrants must maintain the following records and present them to the tax auditor during the audit:
Records of all supplies and imports
Tax invoices and documents related to receiving goods and 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, along with records showing tax paid on the same
Records of goods and services purchased for which the input tax was not deducted
Records of exported goods and services
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Rights & Powers of Tax Auditors in the UAE
As per Chapter 2 of Federal Decree-Law no. 7 of 2017 on Tax Procedures and Title eight of Cabinet Decision No. (36) of 2017 on the Executive Regulation of Federal Law No. (7) of 2017 on Tax Procedures the tax auditors have the following rights and powers:
1. Right to Enter Premises
As per Article 18 of the Tax procedures Law, tax auditors in the UAE have the power to enter any place where the person subject to the audit performs the business, stores goods, or keeps records. If the need arises, the auditor can temporarily shut down the place in question for a period of up to 72 hours to perform the audit without prior notice if tax evasion is suspected or any potential hindrance to the tax audit is suspected.
2. Right to Obtain, Seize Assets
As per Article 18 of the Tax procedures Law, a tax auditor has every right to access the original records of copies of the records. The UAE tax auditor has the power to take samples of the stock, equipment or other assets from the place where the person subject to the audit conducts the business. The auditor has the right to seize the samples of stocks, equipment or assets if the need arises.
3. Right to Audit New Information
A tax auditor can audit any new information surfaced during the tax audit that may have an impact on the outcome of the Tax audit. However, this is conducted if the procedures are in accordance with the Tax procedures Law as well as the Executive Regulations of the Tax Law.
Major Things Reviewed During Tax Audit in the UAE
The taxable businesses are required to understand the major aspects that go under the FTA radar during a tax audit in the UAE. The following is a list of things that get reviewed during a UAE tax audit:
1. Accounting Software & System
Taxable companies are required to use proper accounting software to ensure compliance with the UAE VAT Law. Proper accounting software will help the companies reduce potential errors and discrepancies while filing VAT returns in the UAE. Proper accounting software should generate the reports and records as defined under Article 2 of the Tax Procedures Law. The best VAT consultancy firms in Dubai, such as Al Fakher Accounting, assist businesses in deploying the most effective accounting software.
2. Output Tax Review
The UAE tax auditors also check whether zero-rated, exempted, and standard-rated taxes are calculated as per UAE tax laws. They verify that standard tax rates, such as 5% or 0%, are applied correctly on taxable supplies and that goods eligible for zero-rated tax are charged as zero tax only with proper official and commercial evidence. They also check the records of goods imported into the UAE to ensure they have been recorded under the reverse charge mechanism.
3. Input Tax Review
During a tax audit in the UAE, the input tax is reviewed to determine if expenses and purchases are eligible for tax calculation. The UAE tax auditors check that input credits are validly taken for 5% and 0% supplies and not claimed for exempted supplies or restricted input tax items like entertainment services. The tax auditor also ensures the taxable person has received proper tax invoices with their TRN to confirm eligibility for input tax credits. Al Fakher Accounting provides expert assistance to businesses in preparing for this aspect of the audit.
4. VAT Returns Review
The tax auditor verifies the submitted VAT returns against accounting records to confirm completeness and compliance. VAT returns must be reviewed by experienced VAT consultants before submission to the Federal Tax Authority. This ensures the records meet all requirements of the tax authority. Businesses can rely on Al Fakher Accounting to meet FTA standards during a tax audit.
Notification of the Tax Audit Results
The FTA will notify businesses about the final results of a tax audit within 10 business days from the completion of the audit, as per Article 17 of the Tax Procedures Law. Businesses subjected to the audit have the right to view or obtain the documents and data on which the FTA based its tax assessment.
Always Hire FTA Registered Tax Agents
The FTA conducts tax audits to ensure compliance with the VAT Law, Excise Tax Law, and other tax regulations. Since the audit is performed by the FTA, businesses need the expert assistance of registered tax agents in Dubai, such as Al Fakher Accounting, to prepare effectively.
Al Fakher Accounting is a reputed VAT consultancy firm in Dubai with a team of FTA-registered tax agents. We assist companies with pre-audit and post-audit support, as well as guidance during the tax audit process. Our services range from transaction advisory to documentation support. We help identify risks, areas of exposure, and non-compliance issues before and after the audit, and we advise on corrective actions after the audit is completed by the FTA.