Tax Audit service in Dubai

Tax Audit service in Dubai

Tax Audit is one of the compliance checks or to verify a person’s VAT liability is accurate by way of examining various records which are maintained by the taxpayer. It is basically a government’s assessment of a company about their responsibility as a taxable entity. The government also assesses a company whether they are following certain responsibilities that apply to their business as per the tax laws (VAT Law, Excise Tax Law, etc.).

This kind of audit is conducted by the FTA to ensure that every liability is paid and every tax due is collected and given to the government within the timeframe given.

A tax audit may be carried out at the taxable person’s business premises known as ‘field tax audit’ or in the offices of the FTA. Generally, prior notification of an audit will be given to the taxpayer.

Tax audit procedure

The FTA authorities will check the returns and other details. There need not be a specific reason for the FTA to conduct an audit of a company. They can conduct it for any reason or whenever they want. A notice will be issued to the company, at least five days before the scheduled audit date. It will contain details, such as the audit schedule, place, involved parties, reason (if anything particular), etc. The auditor/s and the company will meet at the scheduled place at the scheduled time and the process will begin. The auditor may ask for business records, in original and/or copies, and take samples of goods and other assets as available at the place at the time.

The tax audit is required to be conducted during the official FTA working hours, unless the Director-General decides to conduct the audit of a business outside regular hours, in an exceptional case. The Company subject to a tax audit, along with their legal representatives and tax agents, are required to provide full assistance to the auditors performing their task. If anything, suspicious is found in the result of the audit that might impact the tax return, the authority may order a re-audit for further analysis. The audited person has the right to ask for the notification copy and related documents and be present during the auditing procedures that are conducted outside of the official places.

What is the timeline for Tax Audit?

All the VAT registered businesses will not be audited and also there is no fixed frequency in which the tax audit will be conducted. From time to time, the FTA will select the businesses who are required to be audited. The decision to audit the businesses completely is at FTA’s discretion. The following are some of the factors which are considered in selecting the business for tax audit

How large or complex the business

Past compliance history of the business

The tendency of late submission of returns

Instances of incorrect return filing and so on

For example, a large business selling a high volume of goods and having a poor compliance record is more likely to be subject to a tax audit than a small business with a strong compliance record, as the risk to the tax revenue is greater.

The FTA will usually inform the taxable person in the question of tax audit 5 business days in advance. However, in certain exceptional cases like suspected tax evasion, or if there is a reason to believe that notifying would hinder the conduct of the audit, no notice of tax audit will be given.

What is the timeline for Tax Audit?

All the VAT registered businesses will not be audited and also there is no fixed frequency in which the tax audit will be conducted. From time to time, the FTA will select the businesses who are required to be audited. The decision to audit the businesses completely is at FTA’s discretion. The following are some of the factors which are considered in selecting the business for tax audit

How large or complex the business

Past compliance history of the business

The tendency of late submission of returns

Instances of incorrect return filing and so on

For example, a large business selling a high volume of goods and having a poor compliance record is more likely to be subject to a tax audit than a small business with a strong compliance record, as the risk to the tax revenue is greater.

The FTA will usually inform the taxable person in the question of tax audit 5 business days in advance. However, in certain exceptional cases like suspected tax evasion, or if there is a reason to believe that notifying would hinder the conduct of the audit, no notice of tax audit will be given.

Where the tax audit is conducted?

Tax Audit is conducted at the taxable person’s place of businesses or in some cases at FTA’s office. If the audit takes place at the taxable person's place of business, it will usually be during the FTA’s normal business hours.

How the tax payer responds to tax audit notice?

The businesses which are subject to an audit (including their tax agent, or legal representative), must facilitate and provide the required assistance to the tax auditor to carry out the audit in a smoother manner. The following are some of the actions that the taxpayer should ensure on receiving the tax audit notice:

Relevant premises are accessible;

Tax records such as books of accounts, Tax invoices etc. are accessible for examination

Relevant staff are present (for example the person responsible for compiling the tax return)

Original copies of documents or invoices

In the event of failure to provide the required records or assistance in conducting the tax audit, applicable penalties may be levied on the taxpayer.

Findings and courses of action after tax audit

On completion of the audit, the FTA will communicate the results of the audit to the taxable person. If the conclusion of the audit leads to the determination of any of the following cases, then tax assessment will be issued

Failing to apply for registration within the timeframe specified by the VAT Law.

Failing to submit a Tax return within the timeframe specified by the VAT Law.

Failing to settle the payable tax stated as such on the Tax return that was submitted within the time limit specified by the Tax Law.

Submitting an incorrect VAT return.

The Registrant failing to account for Tax on behalf of another person when he is obligated to do so under the Tax Law

The shortfall in VAT payable as a result of a tax evasion

Also, there could be administrative penalties levied on the taxpayers if the findings lead to those instances specified in the law