What is VAT Health Check in UAE?
VAT Health Check in UAE
A VAT Health Check is an impartial evaluation of the efficiency of the documentation, control mechanisms, and VAT procedures. It involves keeping accurate tax records as mandated by law, reviewing VAT reports, and analyzing pertinent company transactions. An organization’s VAT audit may be requested by the FTA for any cause at all. To prevent non-compliance fines, it is crucial to be clear and accurate with the VAT returns and other legal obligations. The UAE VAT Health Check will be conducted in compliance with the guidelines and specifications provided by the FTA.
How to prepare for VAT Audit?
The VAT returns filed for each tax period are dependable sources of information that provide the FTA with the value of all taxable supplies. If any taxable revenue is missing from the VAT return or if input recovery amounts exceed actual expenses, the officer can review these details to make such determinations. Furthermore, it is plausible that further income was obtained but not reported in the tax return or VAT return. When firms neglect to follow the protocols of periodic closing, limiting back-dated entries, and maintaining reconciliation with returns, tax auditors are able to rapidly identify anomalies in the accounts. These differences could be seen as taxable supplies if they result from reporting errors or are not appropriately identified and communicated to the officer.
The VAT law states that exports of goods that are accompanied by official and commercial documentation are to be considered zero-rated. Currently, a large number of UAE-based companies send items without obtaining the necessary export documentation, mainly departure certificates. For various reasons, such as exporting in small packages or consolidated exports, not being required by customs, not being delivered by the logistics company, or not meeting the VAT law’s requirement that official documentation include an export document issued by the customs authority improper document collection, this documentation may not be available. But given that they, the tax authorities might reject those arguments. Under similar circumstances, the officer may ask the taxpayer to consider the tax implications of each local supply and treat each shipment of goods as a local supply. Correct documentation is essential for businesses to comply with the zero-rating of exported goods.
Additionally, the auditors look for any anomalies in the way the business treats its tax liabilities, such as standard rates that are reported as zero-rated or exempted, deemed supplies, related business transactions that are not regarded as taxable supplies, taxable supplies that are believed to be outside of scope, etc. Companies in industries like real estate, healthcare, education, transportation, and electronic services, which have variable VAT rates, might need to review the tax regulations to make sure they are in compliance.
As long as they have the tax invoice and the payment is completed or agreed to be made within six months, taxable individuals who make taxable supplies are eligible to deduct the input related to the costs of those supplies. Restrictions on input recovery include the use of a vehicle, a phone, entertainment, and personal costs. These restrictions stem from the possibility of classifying input as personal expenses or are imposed by law. In order to identify the expense heads and decide whether input recovery should be disallowed, the tax officer will review the trial balance and working file for the VAT return filing.
The taxable person must have paid the taxable expenses or stated their intention to do so within six months in order to qualify for input recovery. During the audit, the tax officer may ask for payment evidence, such as a bank statement entry or a receipt voucher provided by the supplier, to verify the payment to the provider. Firms may sometimes claim input on expenses without paying the supplier due to a range of reasons, such as conflicts, long credit periods, discounts, cash flow concerns, etc. If the tax auditor finds a circumstance where input VAT is recovered without payment or with the intention of making a payment, he may insist on reversing the VAT input.
IBR Group Top Accounting and Auditing with VAT health check: Why should you hire them in UAE?
Our all-inclusive and thorough VAT health check service looks at every aspect of how your company handles its VAT obligations and suggests realistic next measures you can take to address any possible issues. We will assist you in getting your VAT health check completed in the following ways as one of the top VAT experts in the UAE:
– Analyze your VAT records, supporting documentation, internal accounting records, etc.
– Examine the submitted returns to identify any areas where you are routinely committing errors.
– Check to make sure the amounts returned in line with the VAT paperwork match the accounts.
–Verify if you are using the VAT legislation to get your business the right credits or refunds and if the claims for these are included in the returns.
– Identify the locations where appropriate VAT planning can be made.
– Analyzing the maintenance of the finances, records, and audit trails in your VAT files.
– Identifying potential or problematic regions.
– Confirm that all VAT returns pertaining to your company’s revenue and authorized expenses have been correctly and properly lodged.
– Check that all of your registration paperwork are up to date or have been renewed on time, and that they all meet FTA requirements.
– The VAT Health Check makes it easier to select the VAT accounting plan that works best for your kind of company.