Tax Audit in UAE

TAX AUDIT

Commencing on January 1, 2018, the UAE is now subject to the Tax Law. To guarantee that every division is prepared for the new transition, all firms in Dubai and the UAE should check.

According to the Federal Decree-Law No. 7 and the Tax Procedures Law, a tax audit is a procedure used by the Federal Tax Authority (FTA) to review the financial records or other information or data of taxable persons conducting business in the UAE.

To verify that all taxes are paid in total and are transferred to the government within the allotted timeline, the FTA conducts a tax audit on a taxable person.

The FTA may perform a tax audit at its office, the taxable person's business premises, or any other location where the person conducts business, in accordance with Article (17) of the Tax Procedures Law (places where the entity keeps records or stores goods).

The auditing scenarios are transforming, it’s becoming more stringent, and the regulatory bodies demand greater transparency. Auditing not only helps in ensuring that companies are presenting a true picture of financial statements to their users, but also helps the company to track its performance and support future planning.

The company's accounting software needs to be updated, and that is one of the main discussions. To ensure that the reported transactions match up, accounting systems should be examined.

Auditing services in UAE are working constructively towards meeting all the agendas required to build a base and meet the law of the land, the interest of the company, and other users and prospective users of the financial statements of the company.

HOW TO CONDUCT A TAX AUDIT?

When the FTA conducts a tax audit of a business, tax advisors in Dubai can help the organization process. Following the advice of qualified advisors will provide businesses with more confidence to handle the UAE tax audit.

The steps for preparing firms for UAE tax audits are listed below:

• ANALYSIS OF THE SYSTEM

All tax-related transactions in the UAE are audited by tax auditors, thus companies must make sure that their records are accurate and without any discrepancies. Businesses in the UAE can evaluate their systems to make sure they are being accurately recorded with the aid of knowledgeable tax consultants in Dubai.

In order to retain data in the standards needed by the FTA, the UAE FTA evaluates whether each department has the most updated and cutting-edge accounting software.

• ASSESSING TAX CALCULATIONS

To adhere to the UAE VAT legislation, firms in the UAE must concentrate on the input and output tax calculations. Many products or services that are subject to zero or exempted VAT rates should be treated as such and the usual tax rate in the UAE is merely 5%. Tax advisors will guarantee that the business computes input and output taxes with accuracy.

• REVIEWING VAT RETURNS

Businesses with a VAT registration must submit their VAT returns online via the FTA portal. The process of completing a VAT return entails entering data electronically into the appropriate fields on the VAT return form found on the FTA portal for values of sales, purchases, output VAT, input VAT, etc.

The best VAT consultants in Dubai can assist firms in ensuring that the returns are submitted appropriately. Businesses can get help from tax consultants in Dubai to record the values in the appropriate boxes and submit the necessary documents by the FTA's deadline. A tax expert will ensure that you file your taxes on time and pay them to the government.

WHAT ARE THE DOCUMENTS REQUIRED TO BE MAINTAINED FOR TAX AUDIT?

According to Federal Decree-Law Article (78), a registrant is required to keep the following records and make them available to FTA upon request:

• Documentation of all imports and supplies
• Tax invoices and other paperwork connected to accepting payments
• All tax credit notes and documents obtained
• Each and every tax invoice and document issued
• Records of products and services disposed of for reasons unrelated to business and records demonstrating tax paid to the same
• Records of goods and services bought but not subject to the input tax deduction.
• Export Goods and Service Records
• Records of account changes or tax invoice revisions.
• Information on imported goods, including customs filings and supplier invoices

The list is not complete, but the FTA has the right to request any further documents. Engaging the top tax consultants in Dubai to draught the paperwork in accordance with the applicable tax laws will come to aid.

WHAT ARE THE ADVANTAGES OF TAX AUDITS?

Since a tax audit involves the government reassessing a company's status as a taxable body, its impact on an organization is highly substantial.

The following benefits or significance for an organization come from a tax audit:

1. A tax audit safeguards the taxpayer's rights. The privilege to examine the tax auditors' official identification cards has been granted to the taxpayer. He can get a copy of the notification of the tax audit. He is welcome to participate in the auditing processes and get copies of any original paper documents or digital files.
2. It upholds professional discretion. If judicial authorities do not request the information, FTA employees are not allowed to share it.
3. A tax audit improves the company's credibility
4. It will ensure that the company enters the total income and the deduction claims appropriately and accurately.
5. It reduces the probability of fraudulent activities.
6. Tax audits aid in the accurately comprehensive presentation of accounts to the tax authorities. It allows for the suggestion of system changes and highlights the shortcomings in the accounting system.
7. An audit gives shareholders reassurance that the financial data in the accounts and calculations are accurate and legitimate.

As per Federal Law No. 32 of 2021 on Commercial Companies (the New Companies Law) that has repealed and replaced Federal Law No. 2 of 2015 on Commercial Companies (the Repealed Companies Law) the following criteria must be met:

• Every corporation must appoint one or more auditors for the annual review of financial statements, which must include a balance sheet and a profit and loss account.
• The company must adhere to international accounting standards and practices while creating its periodic and annual reports in order to give investors an accurate and understandable picture of profits and losses.

According to the Commercial Companies Law, all mainland-based businesses must maintain their financial records for 5 years and obtain a certified copy of their financial records. The audited reports shall be submitted to the authorities within a period of 90 days of the company's year-end.

Whereas auditing may not be a mandatory requirement for a Free zone company, again it depends on the free zone in which the company is established.

HOW CAN WE HELP

1. Presents a true and fair picture of the organization
2. Detects and prevents fraud
3. Helps management in decision making
4. Compliance with the law
5. Attracts investors
6. Expertise and experience
7. Saves time and resources
8. Verification of internal control
9. Reduction in cost
10. Increases goodwill

In a company established on the mainland, the management can choose any auditor as they, please. But in the free zones, only an approved auditor can conduct an audit. In UAE, jurisdiction is a matter of concern while considering the audit and assurance process, it is different for a different jurisdiction.

After setting up a business it is essential to keep a tab on the business activities, auditing and assurance services can be a lot of use. These services providing reports, not only help track the activities and meet the legal requirements but also help management in further decision making, and so boost the business leading the growth of the business, and attracting investors, which in turn increases the goodwill.

Hiring us as service providers will not only save you time and resources but also give you an expert opinion and tailored solutions for your enterprise. The professionalism they work with has given higher accuracy, transparency, confidentiality, and orderly workflow.