Factors Leading to FTA Tax Audit in UAE?
There are numerous scenarios that could lead to an FTA tax audit of a corporate organization. Here, we go over a handful of the most important ones that could result in a tax audit. It is important to remember that one of the main duties of a company’s management is to ensure that all tax-related operations are carried out properly. Any deviation from this might result in penalties and fines. It is strongly advised that you do an ongoing assessment of your company’s tax function and make sure the following problems are avoided:
1. Failure to file accurate VAT returns
Any refusal or delay in submitting the VAT return on time may result in non-compliance and more opportunities for inquiries. Furthermore, accurate transaction classification and appropriate VAT treatment implementation are critical areas that need to be verified.
2. Failure to follow the procedures for registration and deregistration
Everyone conducting business in the United Arab Emirates is required to be aware of the regulations and prerequisites pertaining to tax registration and deregistration. Penalties or the potential for a tax audit may result from any failure to comply with the directives issued by the tax authority.
3. Tax credit notes and invoices not in the required formats
Specifications for the data needed in tax invoices and tax credit notes have been established by the VAT rule. Businesses must guarantee compliance by following the guidelines for the tax document types.
4. Insufficient documentation in voluntary disclosures
When corporations make voluntary disclosures against a VAT return that has already been filed, they must enclose the relevant supporting documentation, which should include a background explanation of the voluntary disclosure’s motivation. A demand for an additional evaluation of transactions may be triggered by insufficiency in the supporting documents that are attached or an increase in the number of voluntary disclosures.
5. Any more situations that might point to tax avoidance
In addition to the aforementioned issues, FTA may request a tax audit in situations where they suspect tax evasion.
What all records to be maintained for a tax audit in UAE?
• Appropriate documentation of the company’s policies and procedures for tax-related actions, authorized as the company’s delegation of authority
• A list of tax mappings that explain how the company’s transactions are treated tax-wise in accounting
• The tax invoices/credit notes for the supplies purchased and the invoices received that serve as the basis for the input tax recovery claim
• Accompanying documentation for the completed imports and exports
• Comprehensive working files for the filed VAT returns and, if any, voluntary disclosures
• VAT documentation for registration and deregistration
• Any additional documentation pertaining to the nature of the business’s operations that are expressly needed by the tax regulation or FTA
Keep yourself updated on regular guidelines and circulars from FTA
It is crucial that you stay current with all of the FTA’s guidelines and publications in order to be aware of any developments and changes in tax law that call for your attention and action. Additionally, your company’s staff members must regularly attend tax training in order to keep up with changes to regulations and mandates. This knowledge will enable them to implement appropriate compliance procedures and controls in all relevant areas. You can receive assistance from CDA in this regard by receiving all pertinent circulars and updates on issues concerning tax accounting and reporting in the United Arab Emirates.
IBR GROUP for Expert Tax Advice
We would be pleased to share with you our tax insights that add value and help you conduct regular assessments of your company’s compliance with VAT laws. With a committed group of VAT specialists, IBR GROUP can help your tax accounting and reporting processes function more efficiently while guaranteeing complete adherence to all relevant tax laws and guidelines.
I hope you now have a clear understanding of the main causes of FTA tax audits in the UAE. We invite you to our free one-hour consultation service if you have any questions or require any of our services. During this time, we can keep you informed on the most recent FTA rules and discuss how to handle any obstacles you may encounter when putting in place an appropriate tax governance environment in your company.