UAE FTA Audit checklist- Guide for UAE Business

The UAE Federal Tax Authority (FTA) is responsible for monitoring tax compliance and plays a crucial role in maintaining regulatory standards. It supervises tax activities to ensure that every business and individual in the UAE fulfills their tax obligations. Maintaining FTA compliance in the UAE is essential for businesses to avoid penalties, fines, and regulatory challenges.

Preparing for an FTA audit in the UAE requires careful planning and attention to detail. Businesses must be well-prepared in advance, and that’s where auditing services in the UAE become invaluable. Professional audit firms in the UAE  provide comprehensive UAE FTA audit checklists, the right tools, and expert guidance to help businesses navigate audits effectively—ensuring they remain audit-ready and fully compliant.

Understanding the UAE FTA Audit

In the UAE, an FTA audit is a regulatory review conducted to determine whether businesses are compliant with tax laws and regulations. The audit may take place either at the business premises or at the FTA office. During the process, auditors review financial records, UAE VAT returns, and corporate tax returns in detail to verify that the records are accurate and compliant.

After the audit, the UAE FTA issues a report highlighting any irregularities, non-compliance issues, or penalties. If necessary, the UAE FTA may also conduct a follow-up audit to ensure that corrective measures have been implemented.

An FTA audit in the UAE is an official inspection where the Federal Tax Authority (FTA) ensures that business adheres to UAE VAT laws. The audit examines financial statements, VAT filing, and transactions to ensure taxes are properly calculated and paid.

The UAE Federal Tax Authority applies various parameters when deciding which businesses to audit, such as:

• High-Risk Profile: The UAE FTA may prioritize businesses that exhibit unusual tax filing patterns, frequent amendments, or mismatched records, which may trigger an FTA review.
• Periodic checks: The UAE FTA conducts surprise checks periodically to maintain transparency and compliance.
• Whistleblower report: If complaints or whistleblower reports are submitted regarding possible tax evasion or irregularities, the UAE FTA may initiate a compliance audit.
• Follow-up reviews: Companies with previous audit findings may undergo follow-up reviews to confirm that corrective measures have been taken and compliance gaps have been closed.

 The UAE FTA audit journey

1. Initial Audit Communication:

   The UAE FTA sends a formal communication that details the purpose, scope, documentation required, and timing of the audit.

2. Audit Requirements & Review:

   During the audit, the FTA carefully examines all submitted documents, including VAT returns, corporate tax filings, invoices, and financial records, to confirm their accuracy and compliance with UAE tax laws.

3. Audit Report:

   After completing the review, the UAE FTA issues an official audit report. This document highlights any tax liabilities, penalties, and irregularities, along with recommendations for improving compliance and avoiding future risks.

Stay one step ahead of UAE FTA audits. Trust Jaxa Auditors for valuable guidance for corporate tax advisory, VAT advisory, accounting, and auditing in UAE.

Frequent Red Flags UAE FTA Audit Should Avoid

Some of the common compliance mistakes that can be identified during an FTA UAE audit include:

• Applying incorrect VAT rates due to errors in classifying supplies.
• Errors in claiming VAT credits, misclassifications, and improper documentation.
• Failure to maintain proper financial documentation and failure to reserve documents by the UAE FTA.
• Incorrect depreciation records, mistakes in VAT recovery, and non-compliance with capital goods rules.
• Not following the UAE VAT registration requirements, misapplying the VAT threshold, and not being compliant in cross-border transactions may trigger some flags in an audit.

The penalties are assessed based on the type and scope of non-compliance with the UAE FTA to determine the final amount.

UAE FTA Audit Compliance Checklist for UAE Businesses

It is essential to prepare for the UAE FTA audit to ensure your business remains compliant with UAE FTA regulations. The following highlights the key aspects the FTA focuses on when conducting an audit.

1. Registration compliance

• Use the Tax Registration Number (TRN) correctly on all official documents.
• Confirm business activity codes accurately represent your operations to prevent discrepancies in UAE VAT
• Verify that your business activity codes align with actual operations.

2. Eligible supplies & exemptions

• Check correct VAT classification: Check that supplies are classified correctly as standard-rated, zero-rated, or exempt supplies under the UAE VAT Regulations.
• Confirm VAT rate applied: Confirm all supplies are correctly recorded using the correct VAT rate under the UAE VAT Regulations.
• Review tax classification: Verify that all the supplies are in accordance with UAE VAT regulations.
• Apply reverse charge correctly: Verify that all relevant supplies are reflected under the reverse charge application per UAE VAT legislation.

3. Input tax & recovery

• Ensure all input VAT amounts are accurately computed.
• Confirm that purchases claimed for input tax recovery qualify under UAE VAT regulations.
• Record all modifications or reversals to input tax claims for UAE FTA review.
• Confirm that only qualifying purchases are claimed for input tax recovery.
• Examine all input tax entries to ensure compliance with UAE VAT regulations.

4. Record keeping

• Keep all sales, purchase, and inventory records up to date.
• Ensure all invoices meet UAE FTA standards for content and format.
• Keep records safely for the mandatory retention period of 5 years.
• Document any corrections or amendments to invoices and financial records.

Engaging with the UAE FTA tax agent will help your business remain compliant with UAE FTA regulations and avoid penalties.

Stay UAE FTA audit-ready with Jaxa Auditors.

The UAE FTA audit checklist serves as a proactive guide for companies to handle audits and ensure compliance with the UAE tax obligations. This requires the expertise of seasoned professionals, where Jaxa Chartered Accountants comes in. With over 18 years of experience and an FTA approved tax agent, our team of tax advisors, accountants, and auditors provides comprehensive guidance in accounting, bookkeeping, corporate tax, VAT, and audit and assurance services. We ensure accurate tax return filings, proper documentation, and audit readiness, helping your business remain compliant and minimize risks and penalties.

With Jaxa Chartered Accountants, you get more than a checklist—you get expert tax advisory, accurate filings, and complete compliance support. Let us help your business stay ahead of UAE FTA regulations and focus on growth while we manage the complexities.

Ensure seamless UAE FTA audit compliance: Partner with Jaxa, your trusted tax and accounting firm in the UAE.

Connect with Jaxa Auditors for a FREE CONSULTATION.