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Financial Records to be maintained for a VAT Audit in UAE

A tax audit is an examination conducted by the Federal Tax Authority (FTA). To verify if an organization is responsibly conducting its business operations as a registered taxable business. This audit ensures that all businesses file the tax returns accurately. And that every liability and tax due is collected and paid to the government. A VAT consultant in Dubai can help you to organize your records and prepare for a tax audit in advance.

Records to be maintained by an organization for VAT Audit in UAE

In accordance with Article 78 of the Federal Decree-Law. A registered organization must maintain the following records for a VAT Audit:

  • The records of all the supplies and imports of goods and services
  • All tax invoices and documents for the purchase of goods and services
  • All the tax credit notes and necessary documents received and issued
  • The records of the goods and services that have been disposed of or not used for related matters or transactions.
  • If it is a business, tax paid for the goods and services disposed of or not used for related matters.
  • Record of the goods and service purchased, and the input tax is not deducted.
  • The records of exported goods and services.
  • The records of any adjustment made to accounts or tax invoices.
  • The details of goods imported to the state. The customs declaration and suppliers’ invoices must also be attached.

This list only contains some of the documents that need to be prepared for a VAT Audit. The Federal Tax Authority (FTA) may also request further documents to be submitted for the audit.

4 Steps to prepare for a VAT Audit in the UAE

A VAT consultant can assist you in preparing for a VAT audit by compiling the required documents and examining the VAT transactions made within a tax period.

  1. Good accounting system for VAT transactions

It is essential to develop a good accounting system. Or update the current accounting software to accurately record the VAT transactions as per the UAE VAT Laws.  An organization should review the accounting system used in the company to ensure there is no inconsistency or irregularity in the transactions recorded.

  1. Reviewing the VAT calculated and collected in each transaction

The recent introduction of VAT in the UAE makes it necessary for companies. To review the past transactions of the tax period by checking whether the transactions are complying with the laws. And if the VAT is calculated accurately on both input and output taxes. The standard rate for VAT is 5% in the UAE. However, transactions that include zero-rated supplies. Or exempted supplies must be treated as required by the law attached to the documents proving such transactions.

  1. Reviewing the VAT returns filed

It is beneficial for a company to appoint a VAT consultant in UAE before the tax audit, to check if the VAT returns are filed correctly with the accurate amounts and have filled in all the information required within the timeframe set by the Federal Tax Authority (FTA)

  1. Reviewing if the VAT is paid on or before the due date

A business can ensure that the correct VAT amount is paid on. Or before the due date to avoid any complications from the Federal Tax Authority (FTA) as a result of missing the due date for paying the tax to the government.

Role of a VAT auditor in the UAE

  • In accordance with the law, a VAT auditor has the right to enter business premises and temporarily shut it down for not more than 72 hours to conduct VAT audit without prior notice if
  • The FTA has reasonable grounds to believe that the person subject to the tax audit is participating in some tax evasion activities.
  • If the FTA has sufficient reasons to believe that if the place is not temporarily closed. It will hinder the tax audit procedure
  • The authorities have the right to obtain any necessary documents or records, verify the stock or assets and can seize them if required for the purpose of the audit
  • A business that is subject to a tax audit can appoint a tax agent in Dubai or a legal representative to assist the tax auditor in performing his duties. This will be beneficial for any organization and fasten the VAT audit process.

Audit firm in Dubai

It is beneficial for any organization to hire a VAT consultant when you get a notice for a tax audit. Farahat & Co can assist you during the process of the tax audit period. The auditing firms in Dubai can review the necessary documents and efficiently organize them for a successful VAT audit.

Jose’s entire educational and professional career has circled around audit and assurance. While in India, he became a CPA and worked as an accountant and an auditor. Afterwards, he relocated to Dubai, where he joined Farahat & Co. as an auditor. He is currently assisting UAE mainland and free zone businesses with their compliance needs. With a reputation for proficiency, quality, and reliability, clients refer to Mr. Jose for independent assessments of organizations structures and operations. Read more