Taxes are significant for a country. The revenue from taxes is a continues source of funds which are utilised in the growth and development of the country. Thus, a country needs to periodically conduct a tax audit for the various businesses in the business environment. The tax audit will help the government to understand if any company is holding any tax fraud. Also, the tax audit will make the computation of the income for filing the returns of the income very easy.
This blog will give all the necessary information about a tax audit which should be known by every entrepreneur.
What is a Tax Audit?
A tax audit is a process by which the government of a country tries to assess and analyse the responsibilities of business with regards to paying taxes and whether the firm fulfils the responsibility adequately or not. This process is conducted by the Federal Tax Authority, Dubai and keeps a check on the timely payment of the tax by all the businesses. This tax is ultimately submitted to the government which is used to develop the economy and infrastructure of the company.
The FTA will also check if the business is eligible to pay other vital taxes such as VAT, Excise Tax etc. according to the various rules and regulations stated by the government.
Tax Audit Process
The person conducting an audit is called an auditor. Depending on the feasibility, the tax audit can be performed in two ways.
The auditor will come to the premises of the company which is being audited. In this option, the auditor can access the required data fairly quickly and thus in this method the auditor will take less time to conduct the audit of the company.
Auditing from Office
The Federal Tax Authority (FTA) can demand the company which is being audited to bring the proper documents required for verification. This method would take a longer time in comparison as there would be a lot of to and for communications and permissions. Also, receiving the required data from the company would need various permits from the management which would take much time.
Before conducting an audit, FTA will issue a notice to the company before five days of the audit date. This notice would consist of all the necessary details such as the timetable for the audit, the venue for the audit and the reason for conducting the audit. The company should keep all the books and records at the ready so that there is no hindrance in the auditing process. In case the company being audited is unable to provide all the necessary documents to the auditor, they are liable to certain penalties.
In certain specific cases, such as suspected tax evasion or the doubt that the notifying the company would deter the auditing process, the FTA would not provide any notification of the tax audit to the company.
After the completion of the audit process, the FTA would produce an auditing report and present it to the company. This audit report would comprise of the results of all the audits conducted (such as fraud investigation audit, financial audit, etc.) and if the company would be liable to any penalty. The law specifies these penalties.
Documents Needed for Tax Audit
As soon as a company is notified that it is going to be audited, it should keep certain ready documents which would help in conducting the auditing process smoothly and swiftly. These documents are enumerated below:
- A record of all the present inventory of the company, their receipts and the tax invoices.
- All tax invoices and tax credit notes or any alternative documents for both of them issued or received by the company being audited.
- Record of all the goods and services disposed of, exported or utilized in the business.
- Any record of the goods or service being imported (Customs declaration or Supplier Invoice)
- The company’s books of accounts (Trail balance, Ledgers, Balance Sheet and Profit and Loss Account)
Keeping the documents mentioned above ready will make the auditing process quick and free of any hurdles. There may be a situation in which the auditor may need to check certain confidential documents of the company. The company must not refuse to provide such reports to the auditor as it may lead to harsh penalties for the company.
Getting audited provides a company with valuable insights into the workings of the business and how can they decrease the bottlenecks and increase the efficiency of the company. To adequately prepare for an audit, your company might require professional help. One such audit firms in Dubai, which can help you be carefree during the auditing process is “JAXA”.
“JAXA” is a highly reputed audit firm in Dubai and has all the right qualifications that you would seek. It also provides various other services such as VAT, Taxation, Accounting and Payroll services which would help in the growth of your company. For more details on the services we provide do contact us, we would be happy to help.