Tax Audit is the audit or the formal examination of the accounting records of the company so to verify whether the liability of the tax on the part of the business or the taxable person is correct or not. It is one of the major compliance checks that is used by the government/ FTA to verify that the details filed at the time of the VAT returns is authentic.
The Federal Tax Authority may opt for any of the two methods available to conduct the audit. The tax audit may be either carried out at the office of the FTA by the auditors appointed by the FTA or at the premises of the taxable person. For the tax audit that is conducted by the Federal Tax Authority, all the taxable persons who are registered under VAT are required to maintain the records that provide all the required details and information related to VAT. Below are the few records that should be maintained and the list could include all the relevant documents.
Details of the all taxable supplies along with the records of all imported and exported goods and services
The tax invoices, issued credit notes and all the documents that prove the receipt of the goods
Details of the tax returns filed with the FTA
Records of the goods and services purchased for which the Input Tax was not deducted
The Federal Tax Authority appoints tax auditor to conduct the tax audit of the registered businesses. The business or the taxable person will always be notified before the audit is conducted by the FTA until and unless it is an exception. The federal law provides the authority and the right to the tax auditor to enter the premises of the business and temporarily close the business so as to perform the tax audit for a period no exceeding 72 hours without prior notice. The exception for the tax audit without the prior notice is when the FTA has solid evidences that the business or the taxable person is involved in the evasion of tax.
It will be a good decision for the businesses to get a tax review done so as to be aware that all the processes and procedures of the business are in line with the rules and regulations established by the FTA under the federal law.
ARC Associates is one of the leading VAT Consultancy in the UAE who have an expertise in performing the tax reviews for all kinds of businesses. Getting the tax review done, safeguards the business from the penalties and loopholes that would arise after the tax audit. It is always better to correct the procedures if any error is found. Tax review help to identify the error and rectify it before time. ARC Associates helps the businesses to be prepared for tax audit to be conducted by the FTA.