The Federal Tax Authority can audit any registered business. You are normally notified in advance, and the audit is largely a matter of matching what you reported to what your records show. Nothing about it is dramatic, but gaps in evidence are expensive.
What the FTA typically asks for
- VAT returns for the periods under review, with the working papers behind them
- Sales invoices, credit notes and the sales ledger
- Purchase invoices supporting recovered input VAT
- Import and export documentation, including customs declarations
- Bank statements and the general ledger
- Contracts for significant transactions
The errors found most often
- Input VAT claimed without a valid tax invoice in the business’s name
- Recovering blocked VAT, especially on entertainment and motor vehicles
- Zero-rating exports without proof of export
- Missing reverse charge on imported services
- Output VAT not accounted for on advances and deposits
- Returns that do not reconcile to the accounting records
The reconciliation that matters most
Before anything else, reconcile your revenue in the financial statements to the output VAT reported across your returns for the same period, and explain the differences: zero-rated sales, exempt supplies, out-of-scope income, timing. If you cannot explain the gap, an auditor will ask you to.
Records to keep and for how long
Tax records must be kept for the periods set out in the Tax Procedures rules, with longer retention for real estate. Keep them in a form you can actually produce: an invoice that exists only in a former employee’s mailbox is not a record.
If you find an error first
Correct it through your next return or a voluntary disclosure, depending on the amount. Disclosing before an audit is materially cheaper than being assessed after one.
Questions we are asked about this
How much notice does the FTA give?
You are generally notified before an audit, though the notice period can be short. Businesses that keep records continuously are never really caught out.
Can the FTA audit closed periods?
Yes, within the time limits in the Tax Procedures rules. De-registering does not erase past periods.
Should I handle an audit myself?
You can, but a consultant who prepares the reconciliations and manages the correspondence usually keeps the scope tighter and the outcome cleaner.
Need help with this? VATAXSYS, VAT and Tax Consultant, handles vat filing for businesses across the UAE. Call +971 55 240 3135 or message us on WhatsApp for a free consultation.