VAT audit in Dubai

VAT audit is a detailed examination of records and books of accounts of your business. It is an examination by the FTA to assess the risk possessed by an individual or a company. After almost 2 year of VAT implementation in Dubai, it’s estimated that 95% of the total registrants have completed their 1st tax year. It’s high time for them to get themselves prepared for VAT Audit. Tax audits in the UAE will usually be conducted by the Federal Tax Authority (FTA) Representatives. Not all the businesses registered under VAT will be audited. FTA will pick random companies for VAT audits. We assist companies in the process of VAT refund following the VAT law, rules, regulations and refund conditions. We assist companies in the process of Voluntary Disclosure under UAE Value Added Tax. A business must deregister under UAE VAT if their taxable supplies for the last 12 month is less than AED 187,500. Auditing services to verify the accuracy and correctness of VAT Returns generated from the financials management systems of the enterprises. Tax audit will verify the liability of VAT through examining the accounting and bookkeeping records and VAT return filings which are maintained by the taxpayer. VAT audit will include reviewing and accessing all the financial records of the company along with the bank statements. FTA will ask for the documents in hard copy and soft copy. FTA will check the sales and purchase invoices and review the books of accounts along with the VAT returns submitted to FTA.

Selecting a business for a tax audit lies completely with the FTA’s decision. Certain factors can be considered before selecting a business for a tax audit, such as:

Large scale businesses
History of late tax submissions
The occurrence of incorrect tax filings
The complexity of a business

Who should file the VAT return in the UAE?

A company in the UAE must be registered as a VAT payer in the following cases:

If this company is resident in the UAE;
It delivers goods to/or gets them from the UAE, or services are provided on the local market.
The annual turnover of goods or the volume of services subject to VAT exceeds 375 thousand dirhams (about 102 thousand dollars).

Documents required for VAT Audit in Dubai:

Records of all supplies and Imports of Goods and Services.
Tax Invoices and alternative documents related to purchases.
Tax Credit Notes received and issued.
Tax Invoices issued.
Records of Goods and Services that have been disposed of or used for matters not related to Business, showing Taxes paid for the same.
Records of Goods and Services that have been disposed of or used for matters not related to Business, showing Taxes paid for the same.
Records of Goods and Services purchased and for which the Input Tax in Dubai, UAE was not deducted.
Records of exported Goods and Services.
Records of adjustments or corrections made to accounts or Tax Invoices in Abu Dhabi, UAE.
Details of Goods imported to the state along with Customs declarations and Supplier Invoices.
Records of fixed asset or capital asset purchased and also amount of input VAT claimed.

Importance of VAT audit in Dubai:

The importance of tax audits cannot be neglected since it is one way to improve and strengthen the operational structure of the company. In order to prevent your company from falling under the prospect of non-compliance with VAT tax law in the UAE, it is better to perform a detailed tax audit review in your organization. Risians in UAE have a right to levy severe penalties, including prison sentences and other monetary penalties if a registrant is found guilty of non-compliance. A VAT Audit review targets’ main focus is to identify and remove the disparities in your organizational tax policies, procedures, and business functions as per UAE tax laws. VAT professionals can simplify the procedures and ensure compliance. They offer a wide array of guiding services right from the pre-assessment to registration and to the collection of funds, including but not limited only to Dubai rather on a national and international level.

Services provided:

Ensuring VAT compliance.
VAT application to cross-border transactions.
Services that maximize the process and application of VAT recovery rates.
VAT accounting and other related policies.
Implementation of correct VAT rates and sales classification in A/P processes.
Multi-jurisdictional VAT obligations.

Based on tax evasion, the following penalties will be levied on businesses by the FTA:

Penalty of AED 10,000 will be implemented for not maintaining financial records.
Submission of Incorrect Tax return by the Registrant will be AED 3,000 for the first time and then AED 5,000 in case of repetition.
Failure of the person conducting business to facilitate the work of the Tax Auditor will be AED 20,000.
Failure of the taxable person to submit a VAT registration application within the time frame specified in the tax law will be AED 20,000.
Tax Violations in UAE will also lead to shutting down of the business entirely and the cancellation of the Trade license.