A VAT audit is a formal examination conducted by the Federal Tax Authority (FTA) to verify that a registered taxable business is managing its tax obligations responsibly and in accordance with UAE VAT law. The audit confirms that tax returns have been filed accurately, that every applicable tax liability has been correctly calculated, and that all tax due has been collected and remitted to the government.
For businesses operating in the UAE, the possibility of a VAT audit is not a remote prospect — it is an active regulatory mechanism that any VAT-registered business may encounter. The most effective way to approach a VAT audit is through proactive preparation: maintaining the right records, reviewing your VAT processes regularly, and ensuring that your documentation is complete, organised, and readily accessible.
This article outlines the records that must be maintained under UAE law for a VAT audit, the steps every business should take to prepare, and the rights and obligations that apply during the audit process itself.
Must Check: VAT Consultants in Dubai
Records Required for a VAT Audit in the UAE
Under Article 78 of the Federal Decree-Law, a registered organisation is required to maintain the following records for the purposes of a VAT audit. This list represents the core documentation requirements — the FTA may request additional documents beyond those listed, depending on the specific circumstances of the audit.
1. Records of All Supplies and Imports A complete record of all goods and services supplied by the business, as well as all imports of goods and services, must be maintained.
2. Tax Invoices and Purchase Documentation All tax invoices and supporting documents relating to the purchase of goods and services must be kept and made available for inspection.
3. Credit Notes and Related Documents All VAT credit notes — whether received from suppliers or issued to customers — along with any necessary supporting documentation, must be maintained.
4. Records of Goods and Services Disposed of or Not Used for Business Purposes Any goods or services that have been disposed of, or that have not been used for related business matters or transactions, must be recorded separately.
5. VAT Paid on Non-Business Use Where a business has disposed of goods or services outside of normal business use, the VAT paid on those goods or services must also be recorded.
6. Purchases Where Input VAT Was Not Deducted A record must be kept of all goods and services purchased where the associated input VAT was not claimed as a deduction — along with the reasons for that treatment.
7. Records of Exported Goods and Services All exports of goods and services must be documented, as exports are subject to specific VAT treatment under UAE law.
8. Records of Adjustments to Accounts or Tax Invoices Any adjustments made to financial accounts or tax invoices — including corrections, amendments, or credit note issuances — must be fully documented.
9. Details of Imported Goods For all goods imported into the UAE, the relevant details must be maintained — including the customs declaration and the invoices issued by the overseas suppliers. These must be attached to the corresponding import records.
Also Check: Registered Tax Agent in UAE
4 Steps to Prepare for a VAT Audit
Effective preparation for a VAT audit significantly reduces both the stress and the risk associated with the process. The following four steps provide a practical framework for ensuring your business is audit-ready at all times.
Step 1: Establish and Maintain a Robust Accounting System
The foundation of VAT audit preparation is a sound accounting system. Whether you are setting up a new system or reviewing your existing accounting software, the goal is the same: to ensure that all VAT transactions are recorded accurately and consistently, in full compliance with UAE VAT laws.
A regular review of your accounting system — to check for inconsistencies, errors, or irregularities in how transactions are being recorded — is an important habit that reduces the risk of systemic problems being identified only at the point of audit.
Step 2: Review VAT Calculations on All Transactions
Each transaction in your business must have VAT applied — and calculated — correctly. This requires reviewing past transactions within the VAT period to confirm that they comply with UAE VAT law, and that input and output taxes have been computed accurately throughout.
The standard VAT rate in the UAE is 5%. However, transactions involving zero-rated supplies or exempt supplies must be treated in accordance with the specific rules that apply to those categories — and the documentation proving the correct treatment must be attached to the relevant transaction records. A thorough review of VAT calculations provides confidence that what has been filed accurately reflects what has been charged and recovered.
Step 3: Review All Filed VAT Returns
Before a VAT audit takes place, it is valuable to conduct a retrospective review of the VAT returns previously filed. This review should confirm that the amounts reported are accurate, that all required fields have been completed, and that all filings were submitted within the timeframes set by the FTA.
Engaging a qualified VAT consultant to carry out this review before an audit is strongly recommended. A consultant can identify discrepancies or omissions that may otherwise be raised by the auditor — giving the business the opportunity to address them proactively through a voluntary disclosure rather than having them surfaced during the formal inspection.
Step 4: Confirm That VAT Payments Have Been Made on Time
One of the most straightforward but important areas to verify is whether the correct VAT amounts have been paid to the FTA on or before the due dates. Late payment is a common source of complications during a VAT audit and can result in penalties that a simple calendar review would have prevented.
Confirming that all due payments have been made — and retaining evidence of those payments — is a quick but essential pre-audit step.
Need Expert Advice?
Contact the team at Farahat & Co. for professional support and expert insights for businesses operating in the UAE.
The Role and Powers of the VAT Auditor
Understanding what a VAT auditor is entitled to do under UAE law is important for any business that may be subject to an audit.
Right of Access and Temporary Closure
In accordance with UAE law, a VAT auditor has the right to enter business premises without prior notice and, in specific circumstances, to temporarily shut down those premises for a period of not more than 72 hours. This power may be exercised if:
- The FTA has reasonable grounds to believe that the business is participating in tax evasion activities, or
- The FTA has sufficient reason to believe that failing to temporarily close the premises would hinder the audit process
Right to Documents, Assets, and Stock
The FTA’s auditors are entitled to obtain any documents or records they consider necessary for the purpose of the audit. They may also verify the business’s stock and assets — and can seize them if required for audit purposes.
Rights of the Business During a VAT Audit
While the FTA’s powers during an audit are broad, businesses also have the right to protect their interests throughout the process. A business subject to a VAT audit is entitled to appoint a registered tax agent or legal representative to assist the auditor in performing their duties on the business’s behalf.
Exercising this right is strongly recommended. Having a qualified professional present during the audit not only ensures that the business’s interests are properly represented — it also facilitates the process, helping the audit to proceed more efficiently and reducing the likelihood of unnecessary complications or misunderstandings.
What the FTA Typically Examines During a VAT Audit
Based on the records required and the preparation steps outlined above, a VAT audit will typically focus on the following areas:
- The accuracy and completeness of tax invoices and credit notes
- The correct VAT treatment of different transaction types — including standard-rated, zero-rated, and exempt supplies
- The accuracy of input and output tax calculations in filed VAT returns
- The timeliness of VAT return filings and payments
- The completeness of import documentation, including customs declarations
- Any adjustments made to accounts or invoices and whether they are properly supported
Having well-organised, complete documentation across all of these areas is the most effective form of audit preparation.
Need Expert Advice?
Contact the team at Farahat & Co. for professional support and expert insights for businesses operating in the UAE.
How Farahat & Co. Can Help
Farahat & Co. provides expert VAT audit support to businesses across the UAE. Whether you have received an audit notice and need immediate assistance, or you are looking to review your records and processes in advance of a potential audit, our experienced team can help you prepare thoroughly and respond to the FTA with confidence.
Our services include reviewing your VAT documentation, examining filed returns for accuracy, organising your records for presentation, and representing your business during the audit process if required.
Disclaimer: This article is intended for general informational purposes only and does not constitute financial, legal, or tax advice. For guidance specific to your business circumstances, we encourage you to contact our legal and professional team for a consultation.
