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Ways to Ensure Your VAT Returns are Audit-Proof

Is there really a thing where vat return in UAE can be made audit-proof? Some kind of way in the preparation of VAT return filing which offers assurance that the business won’t be subjected to audits by the Federal Tax Authority? No, of course not! However, what we can offer you are the best ways of minimizing the risk of the business getting audited by the tax authorities. 

You don’t want yourself and your staff members to be relaxed thinking you won’t get audited. If you are actually audited, it is best to be prepared. What can one do in making sure tax returns are less susceptible to auditing by the FTA?

Here are the suggested strategies:

Be organized

Consider preparing the tax returns with computer software. If not, seek the help of professionals like regulated tax agents in UAE. A tax specialist can neatly prepare all documents related to VAT. When an FTA staffer checks your tax returns, the individual will decide as to whether you will be audited with how the return looks. 

If you are unable to utilize a PC in the preparation of your return, then print it carefully. Make sure you don’t have a messy return with sloppy handwriting and smudges. This is simply a sign that says you should be audited by the FTA. This also gives the impression to the tax authorities that you’re both careless and disorganized. 

Remember that the FTA has already improved the enforcement of auditing in the previous year. The FTA believes that businesses are to be audited if they are given reasons to. With it would be unlikely for you to get audited, your business will increase its chances of avoiding the risk with the help of regulated tax agents in UAE. 

Find more info: Tax Audit: What You Need to Know

Be precise

The only thing that is worse than messy returns is one with incorrect information. It is, therefore, essential that the numbers all subtract and add accurately. It is just among the many reasons why returns are to be filed with the help of experts as seeking the help of professionals will allow you to get rid yourself of the worry of making mistakes to the process. 

Remember that the tax return of business will get archived onto the computers of the FTA. The computers will be verified for any mistakes and inaccuracies. If the return has but one tiny mistake, the tax authorities may start questioning the other amounts declared in the tax return. Remember: you should never give the authorities a reason for you to get audited. If you are filing vat returns yours-elf, double-check the numbers again and again prior to sending them. 

Document all deductions

If you are claiming large deductions for items that are questionable or unusual, e.g. flood, fire, earthquake, attach the documentary proof which backs your tax return. Cancelled cheques, repair receipts, pictures, and insurance reports would be great. Although evidence backing your claim won’t stop FTA in flagging the return you filed, the documents that you have to attach will hopefully be sufficient for the classifier or staffer of the FTA. If he/she thinks the documents you have supplied are great and reasonable, then you won’t be audited. 

Be accurate

Whatever you do, you should never round down the numbers. If you report AED 100,000 instead of AED 130,000, it is an indication that you’re estimating as opposed to retaining proper invoices and reporting correct numbers. 

Never file late

The FTA may give an extension to VAT return filing deadlines and they may claim that late filing won’t increase or decrease the chances of the business getting audit. However, many tax pros don’t advise late filing. As a matter of fact, it is a big no-no. If an extension can’t be avoided, then obviously, there is a need for you to file late. But, remember that the extension in filing tax returns in UAE may only be for the paperwork instead of the payment. 

Yes, this means that there is a need in ponying up the cash that is due to the authorities. Also, remember that there may be fines, penalties, and interest if your business does not pay up on time. 

Read more: 6 Things to Remember to Avoid a Business Tax Audit

 Live small

If you really want to avoid being audited by the tax authorities, you may want to operate in an area that is considered low-audit. Audit exposure can be different from one emirate to another. Although we are not suggesting that you move your business out of where you are currently operating, this is still an option. 

 The best thing you can do in order to fully comply with local tax regulations is by seeking the advice and guidance of the professionals. Should you wish to talk to a regulated tax agent in UAE, don’t hesitate to send us a message. 

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