A Federal Tax Authority (FTA) tax audit in the UAE is a review of a business or individual’s financial records, accounts, tax returns, and supporting documents. The FTA conducts tax audits to check whether the taxpayer has complied with UAE tax laws, filed accurate returns, and paid the correct amount of tax.
Helpful tips to ensure your business is audit-ready
If you receive a notice from the FTA about a scheduled tax audit in the UAE, it is important to prepare your records and assign the right people to handle the process. The following tips can help your business stay audit-ready.
Set up a communication line before the audit
The best time to ask the auditor what documents and materials they need is before the audit starts. This helps reduce surprises and gives your team enough time to prepare the required records.
An auditor appointed by the FTA for a tax audit in Dubai or anywhere in the UAE may request specific documents, reports, invoices, or reconciliations. Make sure your team understands the request clearly and responds within the required timeframe.
Keep files complete, organized, and current
An audit usually involves a review of regular business and tax documentation. This may include tax invoices, tax credit notes, VAT returns, customs documents, bank statements, accounting records, contracts, purchase records, sales records, and supporting documents for expenses and input tax claims.
Keeping your records organized makes it easier to respond to FTA requests and reduces delays during the audit. Businesses should also ensure that records are retained for the required period under UAE tax law. In most VAT cases, records must generally be kept for at least five years, while certain records, such as those relating to real estate, may need to be retained for a longer period.
Read also: FTA to Reduce Fines for 16 Types of Administrative Penalties
Learn from earlier audit results
If your business has gone through a previous tax audit, review the findings carefully. Check whether all earlier recommendations, corrections, or voluntary disclosures have been properly addressed.
If any issue from a previous audit remains unresolved, deal with it before the next audit begins. This puts your business in a stronger position and reduces the chance of repeated errors being flagged again.
Assess changes in company activity
Changes in business activity can affect your VAT and tax position. These may include new projects, discontinued activities, changes in suppliers or customers, new branches, changes in accounting systems, or new internal procedures.
Whenever your business changes the way it operates, review whether the change affects VAT registration, tax invoices, input tax recovery, output tax, place of supply, imports, exports, or record keeping. If needed, consult external tax advisors in Dubai before implementing major changes so the right controls are in place from the start.
Document throughout the financial year
FTA auditors often request documents that prove how a transaction was recorded, reviewed, and reported. Even if your team knows that a review was done, the auditor will need written evidence.
Keep supporting documents for all tax-related transactions, including unusual or high-value transactions. This is especially important for overseas transactions, exempt supplies, zero-rated supplies, related-party transactions, reverse charge transactions, and input tax claims.
Do not archive or remove records for a tax period until all related tax matters and audit requirements are properly closed. If you are unsure about a document, it is safer to retain it and ask a tax professional for guidance.
Stay updated with changes in tax laws and accounting standards
UAE tax rules and FTA guidance can change. Businesses should regularly review updates relating to VAT, excise tax, corporate tax, tax procedures, administrative penalties, e-invoicing, and record keeping.
Accounting standards may also affect how transactions are recorded and presented. Reviewing FTA public clarifications, guides, and updates can help your business identify compliance issues before they become audit findings.
Assign responsibilities
Before the audit begins, prepare a list of the documents and tasks required. Assign each item to the person responsible for preparing or reviewing it. Where possible, add a due date.
Your audit preparation plan should clearly identify who will handle communication with the FTA, who will collect documents, who will review tax returns, and who will approve responses. This helps avoid confusion once the audit starts.
Read also: FAQs You Should Know About VAT
Perform thorough self-reviews of your tax records
Before an audit, review your VAT returns, tax ledgers, trial balance, reconciliations, and supporting schedules. Make sure the figures reported in the tax returns agree with your accounting records.
Check whether output tax has been correctly reported, input tax has been claimed only where allowed, and adjustments have been properly recorded. You should also review major variances between tax periods and be ready to explain them with supporting documents.
Be proactive
If the FTA requests information that you do not fully understand, ask for clarification. This can help avoid delays and incorrect submissions.
You should also brief the key people in your business before the audit starts. These may include the finance team, management, external accountants, and tax advisors. The goal is to make sure everyone understands what the FTA has requested and what needs to be submitted.
Transparency is important during a tax audit. Respond accurately, provide complete documents, and avoid giving unsupported explanations. A clear and organized response can make the audit process smoother.
For expert guidance on preparing for an upcoming tax audit in Dubai, consult the tax professionals at VAT Registration UAE today.
