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.
Tag: VAT in UAE, VAT Update