Tax audit

What is a tax audit/ Vat audit?

Tax Audit is conducted by FTA and is one of the compliance checks or to verify a person’s VAT liability is accurate by way of examining various records which are maintained by the taxpayer. The government assesses a company whether they are following responsibilities that apply to their business as per the tax laws.

A tax audit may be carried out at the taxable person’s business premises or in the offices of the FTA.

The auditor may ask for business records, in original and/or copies, and take samples of goods and other assets as available at the place at the time.

The FTA will usually inform the taxable person in the question of tax audit 5 business days in advance. However, in certain exceptional cases like suspected tax evasion, or if there is a reason to believe that notifying would hinder the conduct of the audit, no notice of tax audit will be given.

The FTA authorities will check the returns and other details. There need not be a specific reason for the FTA to conduct an audit of a company.

The business firm must facilitate and provide the required assistance to the tax auditor to carry out the audit in a smoother manner and ensure that:

• Relevant premises are accessible;
• Tax records such as books of accounts, Tax invoices etc. are accessible for examination
• Original copies of documents or invoices
  In the event of failure to provide the required records or assistance in conducting the tax audit, applicable penalties may be levied on the taxpayer.

Documents required for VAT Audit

All receipted tax credit notes and documentations

All tax invoices and documentation that have been issued.

Records of purchases of goods and services for which the input tax was not deducted.

Export records of goods and services.

Accounts or tax invoices that have had modifications or corrections made to them.

Details of imported goods, as well as customs declarations and invoices from suppliers

All supplies and imports must be documented.

Tax invoices and other papers pertaining to the receipt of goods and services

Factors to consider during VAT Audit

During a VAT audit in the UAE, taxable enterprises must comprehend the primary components that go unnoticed by the FTA. The below-mentioned points consist of items that are examined during an audit in the United Arab Emirates:

• Evaluation of VAT Returns

The vat auditor will compare the filed VAT returns to the accounting records to ensure that the records and VAT returns are accurate.

• Evaluation of Input Tax

In the event of a tax audit in the UAE, the input tax is scrutinized to see if blocked inputs or non-recoverable tax are claimed or not.

• Evaluation of Output Taxes

The UAE tax auditors also make sure that zero-rated, exempted, and standard-rated taxes are computed correctly in accordance with UAE tax legislation.

• Accounting System & Software

To guarantee compliance with the UAE VAT Law, taxable businesses must utilize correct accounting software. Accounting software that is up to date can assist businesses in reducing potential mistakes and anomalies while completing VAT returns in the UAE.

Findings and courses of action after tax audit

On completion of the audit, the FTA will communicate the results of the audit to the taxable person. If the conclusion of the audit leads to the determination of any of the following cases, then tax assessment will be issued

• Failing to apply for registration within the timeframe specified by the VAT Law.
• Failing to submit a Tax return within the timeframe specified by the VAT Law.
• Failing to settle the payable tax stated as such on the Tax return that was submitted within the time limit specified by the Tax Law.
• Submitting an incorrect VAT return.
• The Registrant failing to account for Tax on behalf of another person when he is obligated to do so under the Tax Law
• The shortfall in VAT payable as a result of a tax evasion
• Also, there could be administrative penalties levied on the taxpayers if the findings lead to those instances specified in the law

What Can You Do to Be Prepared for the Audit?

Corplans Global can assist the company to get organized so that when your company is requested for an audit from FTA, you are all set up to face the tax auditors and assist the company to collate the details and documents to be furnished to the auditors. VAT Health Check is advisable for all registrants either concurrently or once in an year. A review of the systems, tax calculation and payment will ensure that there is no inconsistency with the recorded transactions.