Preparing for a Successful VAT Audit in the UAE

What is a VAT Audit?

A VAT Audit involves reviewing business records, tax returns, and supporting documents to ensure proper compliance with VAT laws. The Federal Tax Authority (FTA) conducts VAT audits to verify that taxes are paid correctly, VAT refunds are appropriately claimed, and tax liabilities are properly reported. During this audit process, the FTA may request specific business details to verify against information previously declared in VAT returns or other submitted documentation.

When Does the FTA Conduct a VAT Audit?

Previously, the FTA had the option to audit VAT returns within five years of the relevant tax period. However, since January 1, 2023, a new Statute of Limitation (Article 79bis) has been introduced, allowing the FTA to extend the audit period by four years. Therefore, audits can be conducted up to nine years after the tax period ends. The FTA can issue an audit notice without prior cause, and businesses will be notified at least five days before the scheduled audit, including details about the audit date, location, and purpose.

VAT Audit Procedures

The FTA can conduct VAT audits in the following ways:

Remote or Desk-Based Audits: Primarily conducted through system data and documents provided.
On-Site Audits: If the remote audit is insufficient, an on-site audit may follow, requiring further documentation and preparation.

Documents the FTA May Request

Businesses are required to submit the following documents within five working days:

A detailed transaction list in the prescribed format
Reconciliations, including VAT ledgers, revenue, and reverse charge mechanism (RCM)
Audited financial statements
Supporting documents for transactions, such as export documentation and VAT-exempt transactions
Formats of tax invoices and credit notes
Stock movement or verification reports
Any other documents requested by the FTA auditors

How to Prepare for a VAT Audit

Taxable persons should ensure the following documents are prepared:

Tax invoices and related documentation for all goods/services provided
Export-related documents like customs declarations and exit certificates
Import-related documents, including supplier invoices and customs documents
Tax invoices for goods/services against which VAT input is claimed
Transaction lists in the FTA’s prescribed format
Period-wise reconciliation of revenue and VAT ledgers

Pre-Audit Precautions:

Regularly review your internal controls, accounting software, and invoicing systems to ensure VAT compliance
Double-check VAT returns before submission
Periodically review VAT returns with external consultants
Stay updated with any changes in tax law and apply necessary system updates

Potential Outcomes from a VAT Audit

VAT audits can result in:

Assessment of penalties for non-compliance or underpayment of taxes
Further investigation if other issues are found

Proper preparation and regular audits of VAT returns will improve your ability to manage the audit process.

Benefits of Preparing for a VAT Audit

Streamlines the document collection process when the audit begins
Accelerates the audit completion, avoiding delays and potential VAT refund issues
Identifies and corrects any errors before the audit, reducing the likelihood of penalties

How Yuga Accounting & Tax Consultancy Can Assist with VAT Audits

At Yuga Accounting & Tax Consultancy, we specialize in preparing businesses for VAT audits through our comprehensive VAT Health Check service. Our proactive approach helps identify and rectify errors before they are flagged by the FTA. Here’s how we assist our clients:

We ensure your records are maintained in the FTA’s prescribed format
We keep you informed about any updates to the FTA’s requirements
We assist with preparing reconciliations that may be requested by the FTA
We review all your transactions for VAT compliance
We ensure all records for supplies, both received and provided, are in order
We prepare and review stock movement reports and identify any discrepancies
We offer recommendations on the proper formats for documents
We provide guidance on necessary changes to VAT returns and VAT TRN applications

Our VAT Health Check service offers a comprehensive report tailored to your business needs, ensuring complete VAT compliance and helping you avoid penalties.

FOR MORE INFORMATION, CONTACT US :

Phone : +971 52 1952 532 / +971 4 240 1110

Mail-Id : [email protected]

Website : www.yugaaccounting.com