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Complete Guide on Tax Audits in UAE

Complete Guide on Tax Audits in UAE

The UAE Federal Tax Authority or FTA administers the tax laws, as well as various tax benefit programs in the country. An audit is a crucial part of FTA’s range of activities which are aimed at ensuring the tax system remains fair for all taxable entities. With a tax audit in UAE, an FTA officer will be sent to your office or business premises to closely examine company books and records. The officer will confirm whether or not your business is fulfilling all of its tax obligations, receiving the correct amounts in refunds and benefits, and following the tax legislation correctly. 

Businesses in UAE are to be in full compliance with tax laws. The auditing process of the FTA helps taxpayers in better understanding and meeting their obligations, and help maintain public confidence with the integrity and fairness of UAE’s tax system. 

 If you have been chosen for a surprise tax audit by the FTA or you want to make sure you are prepared should your business be scheduled for a tax audit in UAE, the information in this article will help you get started on your preparations. 

Why does a business get scheduled for a tax audit in UAE?

 The FTA chooses to schedule a tax audit in UAE for a particular business based on their risk assessment. This assessment examines several different factors, including frequency and/or likelihood of errors in the filing of tax returns in UAE, and presence of indications of company non-compliance, especially to new tax obligations. Local tax authorities also look at information you’ve filed in your tax returns, then compare the information to similar returns of businesses in the same industry as you. 

You should know: 6 Things to Remember to Avoid a Business Tax Audit

How will I know if I’m scheduled for a tax audit in UAE?

 An official or licensed auditor from the FTA will send you a notification. This can be a phone call, e-mail, and/or written notice. Prior to the commencement of the tax audit in UAE, you will be given crucial details such as the time, location, and date of the audit. Normally, the audit will take place within your office or place of business. It can also be in the office of your representative, if you chose to get representation by a reputable audit firm in Dubai, UAE. 

Upon arrival, the auditor will present valid identification documents to you, then begin the audit process. On-site tax audits in UAE often allow questions of the officer to be addressed immediately in order to minimize delays and interruption to your business operations. 

 Note: an audit in UAE that’s performed by the local tax authorities will involve the submission of certain records. You’ll be given a detailed receipt for the documents that are required. 

You should read: A Complete Guide on Audits and the Quarterly VAT Return

What is examined during a tax audit in UAE?

 A tax auditor in UAE will check information that are in company books and records, including the following:

  • Business records e.g. invoices, bank statements, rental records, contracts, receipts, journals, and ledgers
  • Information that’s already available to the FTA e.g. property details, filed tax returns 
  • Personal records e.g. mortgage documents, credit card statements, and bank statements of company directors 
  • Adjustments that are made by the accountant or bookkeeper of the company for taxation purposes 

During an audit, an auditor in Dubai can find issues. When this happens, the officer will discuss each issue with you. Concerns can also be raised with the auditor should you have any.

After an auditor sent by the FTA examines your company records, any of these things may happen:

  • Correct assessment – this is if the auditor in UAE finds that your assessments are all accurate and nothing has to be performed as correction. You will get a completion letter as notification that the tax audit has closed. 
  • Tax refund or tax payment – should the auditor in Dubai, UAE finds your return to be erroneous and is in need of reassessment, it means you’ll be entitled to tax refunds or you’ll have to settle the tax that you owe. You’ll receive a formal proposal letter which explains the reasoning behind the reassessment. 

If you don’t agree with the FTA’s proposal, it is best that you employ an audit firm in Dubai, UAE to contact the tax authorities and explain why you’re sure that there’s been a problem with the issuance of a reassessment. The audit firm in Dubai will compile the supporting documents and file them with the appeal. You will also get assistance in considering your explanations, as well as responding to questions and inquiries the FTA has on the proposal.

How long is a tax audit in UAE?

The duration of a tax audit in UAE will depend on several factors, including the state of your company records, scope of tax audit, potential delays because of missing records, and consultation with other FTA specialists. 

Good records and assistance of an audit firm in Dubai will reduce the amount of time your business has to allocate for a tax audit in UAE. To know more, call us here in Farahat & Co today!

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