What are the Factors Leading to FTA Tax Audit in UAE?
There can be so many possible circumstances that can drive into a tax audit of a business entity by FTA. Here we discuss a few major factors among them, which can potentially lead to a tax audit. It is to be noted that the proper functioning of tax related activities in a company is one of the fundamental responsibilities of the management of the company and any deviation in this matter can cause penalties and fines. It is highly recommended to perform a periodic review of the tax function of your company and ensure the prevention of the following issues:
1. Non-compliance with registration and deregistration requirements
Anyone involved in business operations in UAE shall be informed about the rules and requirements relating to tax registration and deregistration. Any failure to comply with the mandates from tax authority may lead to penalties or possibility for a tax audit.
2. Non-submission of proper VAT returns
Any delay or defiance to the timely submission of VAT return may lead to non-compliance and further chances of enquiries. Also, proper categorization of transactions and application of correct VAT treatments are extremely important aspects to be checked on.
3. Tax invoices and tax credit note not in prescribed formats
VAT regulation has provided specifications with respect to the details of the information required in tax invoices and tax credit notes. Companies shall adhere to the prescribed formats for the tax documents and ensure compliance.
4. Lack of supporting documents in voluntary disclosures
In case of voluntary disclosures against any VAT return already submitted, companies are supposed to attach the respective supporting documents including the background description on why such voluntary disclosure is made. Inadequacy in the supporting documents attached or increased number of voluntary disclosures may trigger a requirement for further review of transactions.
5. Any other circumstances that indicate possibilities of tax evasion
Apart from the above matters, FTA may call for tax audit in scenarios where possible tax evasion is noted by them.
What all records to be maintained for a tax audit in UAE?
- Proper documentation on the policies and procedures for tax related activities of the company, approved as the delegation of authority of the company
- List of tax mappings for the transactions of the company to understand the tax treatments used in accounting them
- The tax invoices/tax credit notes issued for the supplies made and those invoices received against which input tax recovery is claimed
- Supporting documents for the imports and exports made
- Detailed working files for the VAT returns submitted and the voluntary disclosures made if any
- VAT registration/deregistration documents
- Any other documents as specifically required by the tax regulation or FTA with respect to the nature of the company’s operations
Keep yourself updated on regular guidelines and circulars from FTA
It is really important that you should keep yourself updated on all the latest guidelines and publications being issued by FTA to be aware of any changes and developments in tax regulation that requires your attention and action. Also, the employees of your company shall attend periodic tax training so that they will know about the amendments in regulatory requirements and mandates which will then help them to incorporate adequate compliance measures and controls in all the applicable areas. CDA can help you in this context by sharing with you all relevant circulars and keep you posted on the matters relating to tax accounting and reporting in UAE.
CDA for Expert Tax Advice
We are always happy to provide you with our value adding tax insights and to assist you in performing periodic VAT compliance reviews of your business. With a dedicated team of VAT experts, CDA can support your tax accounting and reporting activities to run in a more streamlined manner ensuring full compliance with the applicable tax rules and regulations.
Hope you got a clear idea of the key factors leading to FTA tax audit in the UAE. If you have any queries or need any of our services, we invite you to our free one-hour consultation service, during which we can update you with the latest FTA guidelines and how to tackle the challenges you may face in implementing a proper tax governance environment in your company.