The VAT is a general consumption tax in the UAE. Unless specifically exempted under the national laws, it applies to all transactions related to goods and services. At every stage of the supply chain in any business, certain value addition occurs. Businesses have to pay the government for this value addition.
VAT registration is an easy two-step process, which businesses can undertake online. The standard rate of VAT is 5 percent for all supplies unless mentioned otherwise in the regulations. While businesses with revenue higher than a certain threshold need to pay VAT, the federal authorities can conduct a VAT audit of your business at any time.
This article aims to introduce you to important questions related to the VAT audit.
4 Important Questions on VAT Audit Process in the UAE
VAT audits are nothing to be scared of. If you are complying with the VAT regulations are setting all your operational practices according to compliance needs, you are highly likely to keep your business safe from penalties resulting from VAT.
If you already haven’t been complying with the VAT regulations, and are planning to now, just seek the Best VAT consultancy in Dubai to ensure that your organizational practices are risk-free and transparent.
Following are some questions you must know the answers to if you are about to register for VAT:
- Who Conducts a VAT Audit?
Under UAE VAT regulations, the federal agency concerned with the VAT is the FTA. It is their website where you register your business for VAT compliance. FTA has the discretionary powers to conduct tax audits. They just have to serve a notice to the organization a few days before. FTA holds the power to decide the way it conducts the Audit.
The federal authority may conduct it within the premises of your organization or ask you to bring the necessary documents and proof of transactions to their office.
- What does a VAT Audit Include?
A VAT audit includes the assessment, evaluations, and reviews of financial records and documents. This assessment entails the records, which are both in the electronic as well as the hard format. The federal tax authority holds the authority to access the accounting and all other tax-relevant records of your organization.
The review and assessment are applicable to the returns that your company files to the authorities. The authority will thus analyze and determine the accuracy of the returns and the documents reflecting their record.
- Do Businesses Possess the Right to Question the Auditor?
While businesses are the party paying the VAT and the FTA is the party with authority to conduct the Audit on VAT, the law does grant compliant businesses certain rights. The authority can conduct the Audit without having to explain a reason, but the businesses before presenting their records can do their fact-checking.
They possess the right to query the credentials of the auditor. Professional identification of the auditor is an important right granted to the businesses paying VAT.
Does the Federal Authority Warn Before Audit?
Federal authority holding power to conduct VAT audit and access all kinds of tax-related data of any company does not need to provide a reason for conducting an audit of any organization. B8ut the FTA needs to serve a notice of at least five days to the organization.
Businesses get this prior notice to be aware of the schedule of the Audit, alongside the place of assessment and the parties involved in the Audit.
Is Your Firm Prepared for a Tax Audit?
Tax audits require a business to adhere to relevant tax laws of the land. You need to adopt the processes as prescribed under the VAT regulations. You must maintain correct and accurate records and retain all documents pertaining to the financial transactions. Last but not least, your company must be VAT compliant and file its returns with the help of professional auditors.
When you have covered all these areas, you can safely assume that your company is prepared for a VAT audit. All of this is almost a guarantee for your company to be safe from penalties in case of an audit. Hence seek professionals for VAT registration, payment, return filing, and accurate recordkeeping now!