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Formalities and Cost for Customs Audit

Suppose you’ve got a notice sent by the United Arab Emirates (UAE) Federal Customs Authority that your business is going to be audited. Do you think you are ready? A lot of importers leave compliance onto their brokers; however, this can be the perfect recipe for penalties should you be faced with a customs audit in UAE.

You may not realize your business is the one that is ultimately responsible for errors or missing information in the customs compliance process. Penalties that arise from customs audits will be issued to your business instead of your broker. Your business will also be responsible for correcting any past transaction based on the final customs audit report.

The formalities and costs of customs audit to absolutely need to know about:

Checking of correct classification of goods

Classification is determined with a full understanding of goods that are being imported, as well as the interpreting of the tariff schedule correctly. It determines your import duties; however, with several different potential classifications, it can be a very complex process. To classify a certain good properly, it is important that a business knows everything about it.

For instance, the GCC common tariff is fixed at five percent of the CIF value for most products. But, there are certain products that are assessed with one hundred percent customs duty. This includes tobacco products and e-smoking devices. Sweetened, carbonated, and alcoholic drinks also have a fifty percent duty.

If a commercial invoice you receive only says ‘drink,’ your broker must be asking clarifying questions such as whether they drink imported is sweetened, alcoholic, or carbonated as this can have an impact on its classification. If your broker is not trying to understand everything about a good that is imported by your business, the correct classification won’t be determined by your business. As the correct classification of goods will be checked by a tax officer sent by the tax authorities to conduct a customs audit of your business, it’s best to conduct an independent audit or external audit in UAE so you’re prepared for the customs audit.

Read also: How to Prepare for a Customs Audit in UAE

Reviewing transactions for reporting of the correct value of the merchandise

A customs audit in UAE undertaken by the tax authorities also involves a thorough review of reports declaring the value of company merchandise. A business in UAE is mandated to declare the correct value for imported merchandise. The declared value will impact directly the duty that’s to be paid.

There are very strict rules and specific methods used for merchandise valuation. A common one is transaction value wherein the value isn't just for a price that’s paid for a good. Commissions, transportation costs, assists, R&D costs, and royalties are also to be added with the customs value for goods.

When a tax officer finds misdeclaration of relationship, value underreporting, and/or valuation error, it is likely for the professional to conclude the business has underpaid its duties substantially. This is because issues can go undetected by the authorities for years. If there’s a mistake uncovered during a customs audit in UAE, it can result in significant costs which include the repayment of taxes and duties outstanding, as well as potentially severe fines and penalties.

Checking for full compliance to customs recordkeeping requirements

Prior to a customs audit in UAE, the tax authority is going to request specific documents that support good importation. A business must be confident in its recordkeeping, most especially in documents that are related to valuation, classification, rate of duty, and applicable free trade contracts.

During a customs audit, if your business is asked by the tax officer to produce certain documents and you're not able to, your business will be penalized. Recordkeeping penalties in UAE can be very significant.

What’s the cost of a customs audit?

A customs audit in UAE will not cost a business if the tax authority finds a business being reviewed to be fully compliant. As for conducting an independent audit to be ready for a customs audit, the cost will be based on the duration an independent audit firm spends in performing an audit.

Get professional help from external auditors in UAE

A business that will be audited by the UAE Federal Customs Authority must be very sure it has strong trade and customs policies and procedures. It is best to conduct a review periodically in order to ensure that your business is updated with the current legislation.

Have an independent audit performed by Farahat & Co’s team of experts specializing in customs audits? An objective and independent assessment will provide a clear perspective of the true readiness of your business for a real customs audit. With over two decades of experience in the industry, the firm can include a comprehensive review of the current processes of your business, identify the potential compliance gaps, and recommend improvement strategies. If you want to be better prepared when the tax authority flags your business for a customs audit in UAE, contact top audit firms in Dubai.

Read also: How Auditors can Test Inventory without a Site Visit?

مدير مراجعة وتدقيق حسابات محنك يتمتع بخبرة تزيد عن 5 سنوات في مجالات التدقيق. لديه براعة
واسعة في تقديم خدمات التدقيق والمراجعة. إضافة إلى ذلك ، فهو بارع في مجالات التدقيق الداخلي ،
مع الالتزام بالمعايير الدولية لإعداد التقارير المالية (IFRS) والمعايير الدولية للتدقيق. عمل سابقًا مع
شركة Thornton International على سبيل المثال لا الحصر ، تنفيذ ارتباطات الضمان وإجراء
حساب ضريبة الدخل / ضريبة الشركات من خلال تحليل الدخل والنفقات.