Tax audits are often a demanding procedure for businesses, however, there are several approaches to going through a tax audit process in the UAE seamlessly. Audit Firms in Dubai can assist you with trusted consultation and audit services so that you can significantly scale down inaccuracies in your financial reporting and confidently explain any irregularities. Audit Firm in Dubai, a part of Farahat and Co, registered tax Agents in Dubai, can efficiently help you with an expert pre-tax audit.
Why does the FTA conduct a Tax Audit in the UAE?
Article 12 of the Federal Law Decree states that the Federal Tax Authority (FTA) has the right to conduct a tax Audit. It is entirely upon the regulatory body to decide which company is selected for an audit. This ensures that the tax system runs smoothly and the company complies with the tax guidelines and regulations. A company, however, can expect a tax audit in the UAE if it has repeated inaccurate tax filing, non-compliance and irregularities in the financial reporting.
What are the triggers for a Tax Audit or Tax Investigation in the UAE?
The best way to handle a tax audit is to be confident about the accuracy of your financial reporting and tax filing during every tax period. For this purpose, Audit Firms in Dubai help companies like yours run a tax health check and prepare you for a tax audit. However, listed below are some reasons that can easily make your company liable for a tax Audit:
- Late filing of tax returns and late payments of tax-related fees
- If there are sharp variances and inconsistencies between current and previous years’ financial reports, such as seemingly high revenues or losses.
- Repeated and erroneous tax reporting that needs corrections.
- When critical financial data is concealed and the correct information omitted.
- The company is at high risk.
- Late or no voluntary disclosures where required.
- If your company conducts a large volume of cash-in-hand transactions.
- Possibility of fraud.
What is the importance of Documentation for Tax audits in the UAE?
Under Article 12 of the Right to Conduct an Audit, the Federal Tax Authority (FTA) requires the company to comply with the documentation requirements. During a tax audit process, the authority will inspect the documents and the assets available at the premises. However, if the required documents or assets are not readily available, they must be presented in the limited time the authority provides. For some reason, the management cannot be available to provide the documents; the tax Audit task must be delegated to a person of authority.
The Federal Tax Authority (FTA) expects the company to store records and financial documents for a minimum of 5 years, even if the person is no longer a taxable person. The Federal Tax Authority (FTA) can make copies of the documents or retain the original documents if required. If there is a movement in the asset, the company must mention
- The purpose of the removal or movement of the asset or document
- The person responsible for the movement or removal
- The owner of the document or the asset.
- Balance sheet
- Records of wages and salaries
- Records of fixed assets
- Inventory and stock accounts
- Bank statements etc.
- Import and export of goods, customs clearance
- Invoices, Credit and Debit Notes
- fixed assets
During a tax Audit, the regulatory authority can mark assets mentioned or omitted from the company’s financial records, indicating that they verified them. Hence, it is crucial to identify the correct assets for the company and accurately place them in the financial statements. Such irregularities come under scrutiny during a tax Audit. Top Audit firms in Dubai have a team of financial experts and CPAs who conduct a checklist of assets and documentation required for an audit.
Read more: RERA Approved Auditors in Dubai
What are the steps for conducting a Tax Audit in the UAE?
- The authority sends notice of tax Audit. The notice includes the possible date of the audit. A written notification is sent to the owner of the company or the authorized person who can oversee the Tax Audit as permitted by the company.
- The Tax Auditors have the right to enter the company’s premises and inspect the assets and documents. They can demand to view documents and assets or move from the premises if required.
- Once the documents are under verification, the UAE tax Auditors have the right to obtain, copy and seize the documents and assets if required. The company cannot obstruct the auditors from doing so.
- The auditors will generally verify the filing of the tax returns, such as the input and output tax reconciliations, and the accounting policies and procedures followed by the audited company. Along the same lines, the tax auditors will verify the compatibility of the accounting software for any manipulation in recording the transactions or deliberate errors in posting the accounting entries.
- The Audit result is issued within ten business days from the end day of the Tax Audit. Further disclosures, documents or details requested by the authority must be provided in the stipulated period at the exact location.
- In case of any penalty levied on the company, the Federal Tax Authority (FTA) will provide an Administrative Penalty Assessment reference number along with its due date.
How does an Audit Firm in Dubai assist you in preparing for a Tax Audit?
A Tax Audit’s first and foremost aim is to check if your tax returns are filed. Getting an Audit Firm in Dubai on board for your tax Audit requirements assures you expert support and timely consultations. A pre-tax audit can help you understand any shortcomings in your tax filing and save your business from incurring penalties. Accountants can assist you with the tax Audit; however, it is always advisable to hire an approved and efficient tax agent in the UAE, so you know through their experience what can be expected in a Tax Audit. If you are anxious about how to handle your upcoming Tax Audit in Dubai, get a free consultation today from Audit Firm in Dubai. We shall be happy to assist you.
Umapathy Anuruthan, is a Senior Auditor at the firm, holds a Business Management Degree and carries with him an experience of 6+ Years, having worked in two of the Big 4 audit firms. He has a ‘hands-on’ understanding of external audits and financial reporting and is well-known for his approach to ensuring the highest quality and accuracy in audits for clients of numerous industries.