Corporate Tax Audit in UAE
Registered Tax Agent Regulated by the FTA (Federal Tax Authority)
Corporate Tax Audit Services
A Corporate Tax audit by the Federal Tax Authority is a formal review of a business’s tax records, returns, and financial data to verify accuracy and compliance. Being prepared for an FTA audit with accurate records, reconciled filings, and proper documentation — significantly reduces the risk of adjustments and penalties. Farahat & Co. provides specialist Corporate Tax audit support, helping businesses prepare for, manage, and respond to FTA audits with confidence.
Understanding the FTA Audit Timeline
The Federal Tax Authority has the mandate to audit any taxable person’s records and returns. Understanding the audit timeline helps businesses maintain records and documentation for the required period.
Key points on the FTA audit timeline:
- The FTA can initiate an audit for up to five years after the end of the relevant tax period or from the date the tax return was submitted — whichever is later
- If tax evasion or fraud is suspected, the audit window can be extended by a further five years — creating a potential ten-year audit horizon
- Taxable persons are entitled to a minimum of five working days’ notice before a scheduled audit
- The FTA may conduct surprise audits where there is a risk that information may be concealed or withheld
How To Prepare for The Audit Process under Corporate Levy?
Preparation is the most effective way to manage an FTA Corporate Tax audit. Businesses that maintain accurate records and well-organised documentation throughout the year are significantly better positioned when an audit is initiated.
Key preparation steps include:
- Maintaining thorough financial records and supporting documentation for all reported figures — including invoices, contracts, bank statements, and accounting ledgers
- Ensuring all Corporate Tax returns are fully reconciled with audited financial statements before and after filing
- Understanding the scope of the audit and the specific records and periods under review
- Engaging a registered FTA tax agent early to provide guidance, review documentation, and manage communication with the FTA throughout the process
FTA Corporate Tax audits may be conducted at the FTA’s own offices, at the taxpayer’s place of business, or at any other location where business activities are carried out. The FTA determines the most appropriate location based on the complexity of the audit and the nature of the records and documentation required. During an audit, businesses are required to: Working with a registered tax agent ensures that all FTA requests are handled correctly and that the business’s position is properly represented throughout the audit.Where Are Corporate Tax Audits Conducted?
What Is the Post Audit Procedure under Corporate Tax
After the audit is complete, the FTA sends a thorough report including all findings, recommendations, and observations. It also includes a breakdown of any tax liabilities found, including those that are overpaid, refundable, or outstanding. This report summarizes the audit’s conclusions and identifies any discrepancies, errors, or violations discovered in the taxpayer’s tax returns, calculations, or payments. The amount owed or refundable to the taxpayer is the tax liability, which is subsequently assessed or reassessed by the FTA. Following receipt of the audit report and levy assessment, taxpayers have 30 days to challenge the findings with a formal appeal.
What Are the Penalties for Violation During an Audit or Regarding the Audit Process?
Penalties for violating the corporation tax(levy) laws and regulations in the United Arab Emirates might vary depending on the type and seriousness of the offense. The following penalties may be imposed on violation:
- Failure to register under the corporate levy framework or to notify the FTA of any changes to registration details is subject to a penalty of AED 10,000.
- If the tax return is not filed or the levy is not remitted within the allotted time, there is a penalty of AED 20,000.
- For every day that the payment is late, there is a penalty of 1% of the tax amount owed, up to a maximum of 300% of the unpaid levy.
- If you underreport your tax liability because of an error in judgment or computation, you will be assessed a penalty equal to 50% of the difference between the tax that was reported and the levy that was computed.
- If someone purposefully understates their tax liability through deception or concealment, they will be penalized 100% of the difference between the reported levy and the calculated levy.
- If you hinder the audit process or fail to provide the required documentation to the FTA, you will be fined AED 50,000.
How to Prepare for a Successful Corporate Tax Audit
A proactive approach to audit preparation reduces risk, demonstrates compliance, and gives businesses the best possible position when the FTA initiates a review.
Maintain Complete Documentation All financial transactions, Corporate Tax returns, tax payments, and correspondence with the FTA must be fully documented and retained. Records should be kept for a minimum of seven years — or longer where the extended audit window may apply.
Align Accounting Practices with UAE Corporate Tax Law Accounting procedures should be regularly reviewed to ensure they comply with UAE Corporate Tax regulations. Particular attention should be given to expense categories governed by specific rules — such as interest deductions, entertainment expenses, and related-party costs — to ensure they are correctly treated in the tax return.
Review Group and Financial Structure A business’s group structure and financial arrangements can affect its Corporate Tax position. Reviewing these arrangements periodically helps identify inefficiencies, ensure compliance, and avoid unintended tax exposures.
Free Zone Compliance Businesses operating in free zones that wish to benefit from the 0% qualifying income rate must ensure they meet all the conditions required to maintain Qualifying Free Zone Person status. This includes maintaining adequate operational substance and ensuring that non-qualifying income is correctly identified and taxed at 9%.
Accurate Returns and Timely Payments All Corporate Tax returns must be accurate, fully reconciled, and submitted within the nine-month filing deadline. Any tax liability must be settled by the same date. Returns should be reviewed carefully before submission to confirm accuracy and completeness.
Responding When an Audit is Notified Once notified of an FTA audit, businesses should act promptly — organising all requested records, designating a responsible representative to manage the process, and engaging a registered tax agent to oversee communications with the FTA. Cooperation and preparation demonstrate good faith and can positively influence the outcome.
Responding to Audit Findings Following the audit, the FTA’s report and any assessments should be reviewed carefully. If the findings are accepted, any outstanding tax must be settled promptly. If there are grounds for disagreement, a formal objection can be submitted within 30 days of the assessment, supported by relevant documentation.
Frequently Asked Questions
When does the FTA conduct a Corporate Tax audit?
Will a Corporate Tax audit be announced in advance?
How long can the FTA audit past tax periods?
How should a business prepare for a Corporate Tax audit?
What accounting adjustments should be made before an FTA audit?
Are audited financial statements required for Corporate Tax purposes?
What happens if a company submits incomplete or irregular accounting records during an audit?
Why is maintaining proper accounting records important for Corporate Tax?
What are the requirements for filing a Corporate Tax return?
Can Farahat & Co. assist with Corporate Tax audit support?
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