VAT Self Assessment Return filed – It’s time to get ready for VAT Audit

The VAT system is based on the self-assessment of tax by the Taxable Person. The Authority, therefore, accepts any amounts reported by the Taxable Person and assumes their validity, provided that those amounts may later be amended as a result of an assessment issued by the Authority within the statutory deadline. There is a misconception that filing of VAT return is the last step of compliance in a tax period although it is the first step towards VAT audit. Businesses should review their already filed VAT returns and make sure that all supporting documents are available with them for the upcoming VAT audit.  Also, businesses should file a voluntary disclosure on the identification of errors or mistakes subsequent to VAT filing as penalties are very stiff if such error identified during VAT audit conducted by the Federal Tax Authority. In UAE, the Federal Tax Authority is responsible for reviewing the correctness of VAT returns or other documents submitted to the Authority, and for carrying out formal examinations/ Audits to ensure compliance to the VAT Law. In case the Authority selects a VAT return or document filed by a Taxable Person to be subject to a review, then the Taxable Person may be contacted and asked:
  • to explain any aspect of a document or Tax Return submitted by it;
  • to provide evidence to prove the correctness of its VAT return, which may include certain tax invoices or relevant business records such as contracts or bank statements or accounts receivable and accounts payable or VAT accounts.
If the Authority observes an error in a VAT return or other document submitted to it by a Taxable Person during an examination or in any other cases, it may issue an Assessment to correct that error. The powers of the Authority to raise an assessment are not limited to the occurrence of an examination. An assessment can be issued at any time, and can also be based on any relevant information provided by the Taxable Person or a third party. An assessment may replace any earlier Self-Assessment of the Taxable Person or any earlier estimated Assessment issued by the Authority. In these cases, any prior fines or penalties imposed based on the earlier Assessment will change to align with the new Assessment. Last Updated: 6th February 2019 This article is contributed by:  CA Vipin  Kumar Ahuja Senior Manager, Taxation

Tag: VAT in UAE, VAT Update