Is your business ready for FTA Tax Audit?

In the United Arab Emirates (UAE), the Federal Tax Authority (FTA) is empowered by the federal law on taxation to conduct tax audits on individuals and businesses to assess their compliance with tax regulations. Under the Self-Assessment System of VAT returns filing, taxpayers and businesses bear the responsibility of correctly interpreting and applying tax legislation to meet their tax obligations. A tax audit is the government's evaluation of a company's tax responsibility as a taxable entity, ensuring timely tax payments and adherence to tax laws. This article delves into the intricacies of a tax audit and outlines how businesses can prepare for such audits with MBG's expert assistance.

Unveiling the Essence of Tax Audits

1. Self-Assessment System: Under the Self-Assessment System, taxpayers are responsible for accurately complying with tax obligations, making tax audits a vital means for the FTA to verify adherence to tax laws.
2. Assessing Tax Liability: A tax audit conducted by the FTA ensures that all tax liabilities are fulfilled, and taxes due are promptly remitted to the government within the specified timeframe.
3. Compliance Assessment: Apart from tax payments, the FTA evaluates whether businesses are fulfilling their specific responsibilities as per tax laws.

Key Components of an FTA Tax Audit

1. Detailed Review: FTA authorities meticulously inspect tax returns, sales invoices, purchase invoices, and VAT documents related to imports and exports of goods/services.
2. Unannounced Audits: Tax audits can be conducted by the FTA without a specific reason or notice. Businesses must be ready to face audits at any time.
3. Preparing for the Audit: A notice is usually issued to the company at least five days before the scheduled audit date, outlining essential details such as time, location, parties involved, and the purpose of the audit.

Preparing for a Successful Tax Audit

1. Timely Preparation: To respond efficiently, businesses must be well-prepared for an FTA tax audit, considering the limited 5-day timeframe provided by the FTA to address any queries.
2. Kinds of Review: Businesses can undertake thorough reviews to ensure audit readiness in various areas, such as standard-rated supplies, zero-rated supplies, reverse charge mechanism, eligible input credits, exempted supplies, and proper record-keeping.

MBG's Expert Assistance for Audit Readiness

1. Tax Health Check: Conducting a tax health check is an ideal approach to assess key tax compliance areas and identify areas that require attention.
2. Corrective Action: Our tax professionals at MBG offer targeted health checks to enable clients to take necessary corrective actions before the audit occurs.
3. Documentation Collection: By conducting health checks, clients can gather essential documentation, ensuring readiness and compliance during the audit.

Being well-prepared for an FTA tax audit is essential for businesses in the UAE to maintain compliance with tax regulations. By undertaking tax health checks and seeking expert assistance, businesses can proactively prepare for audits, ensuring a smooth process and minimizing the risk of penalties. MBG's experienced tax professionals help businesses stay audit-ready and navigate tax audits with confidence.