Worried About VAT Audit in UAE Here’s Everything You Need To Know
In this post we are going to break down EVERYTHING you need to know about VAT Audit in UAE.
What it is… Why it is important… And whether or not it affect your business.
Let’s dive right in.
What is a VAT Audit?
VAT Audit in UAE is an official inspection by FTA. The VAT audit tells the government about the accuracy of tax information submitted by businesses. It also helps the government to know about fraud and incorrect tax returns.
According to FTA: “VAT Audit is a procedure undertaken by the Authority to inspect the commercial records or any information or data related to a Person conducting Business.”
It’s common to think that a VAT audit takes place to verify VAT return. But in actuality, business is selected through computer system. Not only that, the computer system includes industry list with information about businesses turnover, past compliance history, and its trade class.
You are given 5 days notice prior to a VAT audit and many business owners are not prepared for this. VAT audit procedure is explained in detail to help you understand the process in detail.
During the process, you will be asked about your business activities and will be accessed based on how you keep a record of all your VAT. You will be monitored on how you manage all your day to day business records for purchases and sales, book-keeping, etc.
When you get a Vat Audit in UAE, what can you do?
First and foremost, remain calm. Just because the FTA is auditing you doesn’t mean you have done anything wrong.
Here are some ways to approach an tax return audit to be prepared and ready for the examination.
- Decide about tax assistance, who can represent you
- Respond promptly to all FTA correspondence, including letters, phone calls or requests for information and scheduling.
- If the audit’s findings result in penalties or back taxes, understand that you can appeal or negotiate a payment plan. Also, remember auditors can share audit records with other local, state and federal agencies.
Why conduct a VAT auditing of your company?
VAT Auditing is important because it helps to verify the commercial records of any business according to FTA tax rules. If you haven’t taken a look at your records in a while, perhaps it’s time to review them. Failing to keep it up with tax compliance is bad news for your business.
In short: VAT Audit by Professional VAT consultant in UAE can save you from HUGE VAT fines.
In fact, here’s a breakdown of few VAT fines listed by FTA.
As you can see, FTA has clearly stated that businesses should ensure complete compliance of Tax procedure and VAT. This makes it essential that you need reliable VAT services to VAT fines.
Let’s illustrate the importance of VAT audit service with an example…
Let’s say that you run a cafe. According to FTA, if you fail to keep the required records specified by the tax procedures law and the tax law, you pay Aed 10,000 fine for the first time. And Aed 50,000 for each repeat violation.
VAT audit procedure in UAE: Learn what happens in a VAT Audit?
Here are the steps of VAT audit procedure in UAE:
- A notice stating period under audit, time of visit, details required, etc. is issued. This is audit not raid. Audits can be conducted in the office of the tax department also. Without even a single visit to the premises.
- The assesses are required to submit the information.
- Further drilling down happens, up-to-the transaction level.
- Issues are found and explanations are sought.
- If explained properly, it is OK.
- If not, demands are raised.
As a business owner ensure that your all business transactions comply with UAE VAT laws and regulations issued by FTA. That’s why it’s imperative to hire a VAT consultant, who can provide support and guidance as per the updates issued by the FTA.
What can you do to be prepared for VAT audit in UAE? [Checklist included]
One of the crucial factors to consider when dealing with a tax audit is to hire an experienced VAT Consultant in UAE. It is also valuable to note that besides hiring a tax consultant in UAE, you can also take necessary measures.
To give you a place to start, here are the vat audit checklist that can be done in order to prepare you for an upcoming audit.
Review of the Accounting System
Accounting software is one of the most important part of all businesses. Its purpose is to deal with the financials of a business. If the software can’t comply with tax laws, you risk inconsistent financial data.
Make sure to review the system to ensure that all recorded deals follow the FTA tax laws.
Review of TAX Calculation
Incorrect VAT calculations have a significant effect on your business. If calculated correctly, it can save you from incredible stress.
As a basic rule, the tax rate is 5% only. Any goods or services that fall under zero-rated and exempted tax should be treated as it is with documents for support.
Review of VAT Returns
Typically business owners rely on tax consultants to file VAT returns. If that’s what you have done with your VAt returns, review your VAT account periodically. It is crucial since many tax fraud has surfaced recently.
Review of Payment of Tax Due
The correct amount of tax due should be paid on or before the due date. Make sure that you are not drawing any negative attention from FTA by missing the time frame of tax payment to the government.