What are the Records to be Maintained for a VAT/Tax Audit?

Value Added Tax or VAT is a fairly new addition to the tax roster in the United Arab Emirates. Taxes play a very major role in the economy of a country as they help the government to amass funds which will eventually help them to build infrastructure for the people of the country. This is the reason the government should focus more on the taxation of the country. but some of the companies commit tax fraud and do not submit the required taxes.

This is why tax audit plays a very important role as it will help the government to understand if any of the companies are committing tax fraud. Conducting a tax audit can also be beneficial for the companies as in such a case, the return filings become simple.

Let us first understand what a Tax Audit is.

Tax Audit

A tax audit can be defined as a formal examination of the companies which is conducted by the Federal Trade Association (FTA) in the United Arab Emirates. The objective of conducting a Tax Audit is to examine if a particular company has filed its tax returns in a proper way and is not conducting any tax fraud. This examination can be done both randomly or intentionally.

According to the Tax Procedure Law (Federal Decree-Law no. 7) which is issued by the Ministry of Finance, the examining authority can ask for any commercial record or any other information required in order to check the veracity of the claim.

To make the complete process easy and to reach the records quickly, the Federal Trade Association (FTA) has been given with the option to conduct the Tax audit at the place where the business is conducted or any such place where all the business records of the business are stored of the person in consideration.

The Records which are to be Maintained for Tax Audit

In accordance with the article 78 of the Federal Decree-Law, the following records of the company should be maintained by the company and should be made available to the Federal Tax Association (FTA) as and when they are required:

• All records of imports and supplies of Goods and Services
• All the alternative Documents and other tax credit notes which have been received or issued.
• All the records of the Goods and Services which have been purchased for which the input taxes were not deducted.
• All the business records of any adjustments or corrections made to the Tax invoices or the account books of the business.
• All the alternatives documents and tax invoices which are related to receiving of the goods and services
• All the records of the Goods and Services which have been disposed by the business or which have been used for any non-business related matters but taxes have been paid for the said goods and services.
• All the records of the goods and services which have been exported by the business.
• All the details of the Goods which have been imported to the state, Customs declaration as well as the supplier invoices.

The above-mentioned list is not the full and final list of the records to be maintained by a business. During the course of the tax audit, the Federal Tax Association (FTA) can ask for any other document which may be required at that point in time.

Every business needs to keep a check on the amount of taxes being paid by them. Not only the business, but the government should also keep track of businesses so that it is easy for them to examine and evaluate that the businesses are filing the correct amount of taxes. A Tax Audit will be useful to both the parties.