When it comes to a custom audit, preparation is key. A thorough pre-assessment of risks, compliance procedures and internal controls, as well as a review of reports, documents, financial accounts and entries of import, need to be carried out. This will ensure that you put through an accurate customs audit report.
What is Custom Audit
A customs audit is the investigation of accounts, business records, and the risks involved. It is an essential step in ensuring compliance of the business in regards to the various legislative and revenue obligations.
The UAE government empowers the Federal Customs Authority with authority in requiring inspection of customs-related and commercial documents that are related to the import of goods. The tax authority has been conducting customs audits in recent months on imports and exports. Consequently, it's absolutely necessary for taxable businesses to comply with regulations. If your business is scheduled for a customs audit in UAE, here are important tips to prepare your business:
Be prepared for it for as long as possible
The day of a customs audit isn’t the time for you to collect relevant documents. If you wait a long time to prepare and make the tax authority wait to get what they need, they’ll be staying much longer which means more hours are incurred on the budget of your business operations. Having a system for managing documents can make accessing required documents of tax officers quick and easy.
Reconcile significant accounts related to imports and exports
This includes account receivables, cash, accounts payable, accrued expenses, and inventory. This is a very important step that you can take in preparing ahead of a customs audit. The majority of adjustments that are uncovered during a customs audit in the UAE relate to reconciliations that are not being prepared. In addition, it’s imperative to make sure that you support significant reconciling items.
Reconcile changes in agreements
Reconcile changes to agreements or amendments to outstanding agreements related to suppliers and tax authorities. The reconciliation will make sure all changes to accounts during a fiscal year have been accounted for properly and presented correctly within the books of the company.
Gather agreements and amendments
Gather agreements and amendments to the existing agreements of your business which were entered into in a year. This includes operating agreements, debt agreements, leasing agreements, importing agreements, etc. Agreements will be reviewed by tax officers during the fieldwork procedure for customs audit and will be utilized in preparing the footnotes for the financial statements.
Identify significant changes in business operations
You need to identify and communicate the significant changes in your business operations to tax officers. This includes changes in the methodology used by your business in accounting for a previous fiscal year customs audit, as applicable. Proactively addressing changes way ahead of time can ensure a customs audit to go smoothly. If during a year your business enters into major transactions such as changing accounting principles, adopting new accounting pronouncements, or purchasing from different countries, communicate the change to a tax officer upfront.
Focus on audit queries
A customs audit in UAE often involves the tax authority sending a request to have specifics addressed. This means you won't have to stress about every single detail regarding your customs reports as you can simply focus on items that are being questioned. It will be in the areas that auditors are going to take interest in, so you must already be prepared in answering their queries.
if possible, consult with independent auditors to understand what's expected for your specific case. An audit firm in UAE will provide a guide that covers areas of interest of the tax authority and offer insight that will be highly valuable for your customs audit.
Don't go through preparations alone
One thing that you need to keep in mind is the fact that tax authorities will send your business with seasoned professionals that are used to playing around with the numbers. They will be asking you tough questions. This means you're dealing with taxation experts that are masters in getting information from taxpayers. If you go through a customs audit on your own, it's going to be very easy for you to make mistakes that will be costly for your business. This is why it’s important that you seek the help and guidance of experts.
What are the common documents that customs officers ask for?
The Federal Customs Authority may require taxable entities to furnish the following documents from the previous five years:
- Entries on import and export, including all supporting documents;
- Deposit slips, bank statements, check counterfoils, and transfer slips;
- Audited accounts for a period under audit;
- Sale and purchase journal;
- Ledgers regardless of the type;
- Stock records or inventory reports;
- VAT accounting records and VAT returns
The leading audit firm in UAE
A customs auditing firms in Dubai can be a very stressful and daunting experience. Fortunately, with an independent audit in UAE conducted by Farahat & Co's seasoned auditors in UAE, you'll be better prepared for when the authorities arrive. Being an audit firm in the UAE with over three decades of experience, we can help make the process relatively painless for the parties involved. A business that's properly prepared for scheduled customs audits is able to save both time and money. Contact us today for further information.