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VAT Health Check in Dubai - Identify the Risks and Errors In VAT

VAT Health Check in Dubai

A VAT health check is defined as an independent review of the VAT procedures of a business by an experienced VAT consultant. The purpose of doing a VAT health check is to check the effectiveness of the VAT procedures, documentation, and control processes that are being followed by a business in the UAE. In this article, we will be discussing the importance of a VAT health check in Dubai and how Vat registration in UAE can do a proper VAT check for your organization that can help in preventing hefty fines and penalties at a later stage.

What is done in a VAT health check in Dubai?

A VAT health check consists of reviews of previous period returns, the analysis of transactional records of the current scenarios of the business, VAT compliance for the invoices received from the suppliers, and key compliance areas of high risk.

The VAT health check is conducted in line with the guidelines issued by the FTA audit perspective in which the key auditable areas are listed as per the specific industry to which the business belongs and high focus is placed on those auditable areas.

Why VAT health check in Dubai is needed?

The VAT returns in UAE are supposed to be accurate and in full compliance with the VAT rules and regulations set up by the FTA. The FTA can excise its power to conduct an audit on any VAT registrants in the UAE to ensure that the registrant is complying with the VAT laws and regulations. To ensure that the tax records, procedures, and reporting are in accordance with the UAE VAT laws, businesses must conduct a VAT health check to identify the places where compliance and controls have to be implemented and to avoid the chances of errors in the future.

The key objectives for VAT health check in Dubai are as follows-

  1. To ensure compliance of the business transactions with the UAE VAT laws.
  2. To ensure the effectiveness of the controls that have been implemented by a tax-registered business or entity.
  3. To achieve an assurance that the places where non-compliance is there have been identified.
  4. To take corrective action wherever necessary and to fully comply with the UAE VAT law.
  5. To prepare the company for any FTA audits that might happen and to respond to FTA queries whenever needed.
  6. Non-compliances that are identified before the FTA audit can lead to the avoidance of huge fines and penalties.

Procedure to conduct VAT health check in the UAE

The general procedure to conduct a VAT health check in the UAE has been described below-

  1. The first step is to identify the business activity carried out by the tax registered entity and to understand the corresponding system and controls that have been implemented in that particular sector.
  2. The next step involves conducting an administrative compliance check to confirm the updating of the FTA portal with the renewed documents of the organization and authorized signatories as well as timely filing of the periodic tax returns.
  3. Then the transactions that involve revenue of the business must be reviewed and confirmed for the taxability applied as per the UAE VAT laws.
  4. In case a revenue reconciliation arises, the same must be reviewed and the reason of variance must be addressed along with confirmation of its correctness.
  5. The documentation practice must be reviewed and it should be ensured that adequate documents are maintained in order to substantiate the tax applied on specific transactions.
  6. The tax invoices issued by the business and received y the suppliers must be verified.
  7. Lastly, the import and export documents maintenance to support the tax treatment applied by the entity must be reviewed.

The above procedure helps in keeping the VAT-related documents of a business up to date and hence avoids unnecessary hefty fines and also prepares the firm for audits that FTA conducts from time to time.

What is the duration of a VAT health check for an organization?

A VAT health check can take one week and can go up to 4 weeks depending upon several factors. It depends upon the size of the company, the complexity of the transactions of the company, and the types and number of intercompany transitions taking place within the same corporate group.

Is VAT health check mandatory in the UAE?

The VAT health check is not a must-do thing in the UAE. but it is recommended that the same must be done by the entities. Just like a person must go for a daily health check to the doctor to ensure his physical well-being, a business in UAE should go to the VAT consultants in Dubai to carry out the VAT health check to ensure that all the FTA guidelines are in place for VAT transactions taking place in the firm. Recently, there was a case where a leading delivery service company was fined heavily for the tax treatment by another GCC country as specific transactions were incorrect. The company had to later file a case of bankruptcy as it was not able to pay the tax obligations and imposed heavy fines due to non-compliance with the VAT guidelines laid out by the FTA.

How Farahat & Co can help you in carrying out a VAT health check in Dubai?

For a business, it is recommended to get their VAT health check-up done every 2-3 years to ensure that the tax compliances are correctly followed. We, at VAT Registration, UAE have a team of experienced VAT consultants who can help you in getting a VAT health check done for your company. They will help you that the tax compliances have been followed correctly and all the tax dues have been identified and properly settled with the tax authority. So, get in touch with us today and get your VAT-related queries answered.



Ervee is a CPA with international experience in Tax and Accounting. He has over 12 years of experience in accounting and bookkeeping and over a year in VAT implementation, registration, and accounting in UAE. He regularly drives out inefficiencies in company operations and loves the challenge of helping clients find additional ways for an easier and improved compliance and verification of transactions.