The VAT has already been implemented by the UAE government on the supply of taxable commodities, goods and services set up from January 01, 2018. The Federal Tax Authority (FTA) can audit the companies that are required to pay taxes to determine their tax compliance. To keep abreast with the era of the tax system in the UAE, this is the time to get familiar with the terminology. To secure that you are indeed taking reasonable steps in going under the radar of being audited, you can approach your tax agent in the UAE.
A government's assessment of a firm about their management as a taxable entity is known as a tax audit. The FTA conducts this kind of inspection to ensure that every tax due is collected and every liability is paid and given to the government within the timespan given. A company is also assessed by the government to know whether they are following specific responsibilities that apply to their occupation as per the tax law (Excise Tax Law, VAT Law, etc.).
The returns and other details will be checked by the FTA. For the FTA to direct an audit of a company, there need not be a specific reason. During the official FTA working hours, the tax audit is required to be undertaken, unless the Director-General decides to conduct a review of business outside regular hours, in an exceptional case. It is up to them when they want to perform the audit, and there can be any reason behind it. A notice is issued to the company which is in five days before the scheduled audit date.
The details related to it will be contained, such as the involved parties, audit schedule, reason (if anything in particular), place, etc. The process will begin once the auditor/s and the company meet at the scheduled location at the scheduled time. Business records shall be asked by the auditor; hence, you need to keep the original copies and take trials of goods and other assets as accessible at the place at the same time.
If you're planning to operate small or a big business, being aware of all these will help you in handling matters in a better way and dealing with how to keep good records for the improvement of your company.
Furthermore, let's discuss the things you should keep in mind to avoid a tax audit.
1.Know the targets of an audit
There are usually cases that the businesses whose books are generally managed by one person who is the owner himself because it's a one-person show and has a good chance of being audited. There is a high probability of erroneous records since there's only one person, you might be kept an eye on more than anyone else by the Federal Tax Authority (FTA). With the total sales, total purchases, input VAT, output VAT, and tax payable, you should always be careful and meticulous. You should take care of the documentation and ensure that everything is on the spot and is reflecting on what should be recorded.
2. Give Explanations
It is advisable to include all the additional and essential receipts, worksheets, forms, etc.that will help you support noticed inconsistencies with your previous returns and are going to be filed in the near quarter.
The crucial factor is you have to be sure that the FTA knows what's going on with your records and if you include more documents, you can help them understand to support your filing.
3. Always be sure
It is imperative that the numbers that you've recorded have been put in the forms. Additionally, you need not make a habit of rounding off every value or number frequently on your returns. The exact amount is always better to be stated.
4. Do not file any form of corrections
Your goal is not to get noticed by the FTA. You can expect a good chance of tax audit on its way if you are going to keep on filing amended tax returns. Anyone who continuously registers amendments to their performances, it will not help them as it may be viewed as sloppy and inconsistent.
5. Be informed about the filing dates
It is always best to file your returns on time. You shall be aware of the year that you are submitting your returns on or before the due date as you wouldn't want to face any penalties. When you're expecting a refund, filing early would be a great option because then your filed tax returns will be processed first.
6.Ensure that everything is filled out
Risking by leaving a single space empty, is not what you would want. The FTA shall not assume anything concerning your business. You shall answer all the empty spaces even if it's just a zero, hyphen or entirely something else. Contact your tax agent in the UAE to be sure.
The above tips and precautions do not necessarily guarantee that you will not have any tax audit as long as you live. You might still be audited for some reason or other, no matter how careful you are. You need not brood as long as you have correct and clean records that fairly represent your business.
What Can You Do to Produce the Audit?
If you want to be organized in your work, JAXA Chartered Accountants has a team of tax consultants who can help your company to request for an audit from FTA; you'll be all set up to look towards the tax audit. We are a DMCC approved auditors firm and to put together you for an upcoming audit, there shall be the procedure for reviewing different parameters- the system, calculations tax, VAT returns and payment of the fee due. To avail these organized services, contact us today - we'd be happy to assist.