All You Need To Know About the FTA Audit File

May 11, 2022Dated:  | |

There are frequent changes in the UAE tax policy, so you must be up-to-date on all of the latest Federal Tax Authority (FTA) guidelines and publications. That enables you to pay immediate attention and take timely, appropriate actions in compliance. 

To achieve that, you must send your employees who handle tasks relating to your company’s taxation compliance for periodic tax training sessions to help them to stay up to date on changes in regulatory requirements and mandates, which will allow them to implement proper compliance procedures and controls in all related areas of the organization.

What is the FTA Audit File (FAF)?

Your auditors may ask you for the FAF in your periodic audit, and they need it to scrutinize your bookkeeping methods and the accuracy of your tax and return statements. 

The vendors who provide you with the necessary software can easily produce the FAF. It is, however, better to check with them if they can furnish the same at short notice. If you don’t, they could charge you an exorbitant sum for it because you needed it in a hurry.

You must also ensure that the FAF you produce incorporates all necessary updates according to the latest FTA guidelines and publications. 

If you get to know that the documentation of your transaction fails to meet the FTA standards at the time of the audit, you could lose much time and money as it would take days to rectify the FAF.

What Are The Factors Leading To FTA Audits In UAE? 

The FTA conducts tax audits to guarantee that business entities pay all liabilities and the authorities collect and remit the total amount of applicable taxes to the government within the period specified. Numerous factors can lead to an FTA tax audit of a commercial organization.

Could you scroll down to know them?

Non-Compliance with the Standards for Registration & Deregistration

If you are running a business in the UAE, you must know the tax registration and deregistration regulations and requirements. Non-compliance with FTA rules concerning tax audits could invite heavy penalties.

Submission of Tax Invoices and Tax Credit Notes but Not in the Approved Formats

VAT regulations specify how the company must present the essential information in tax invoices and tax credit notes. Your company must be compliant by adhering to the formats for tax documentation.

Non-compliance with VAT Reporting Requirements

Any delay or refusal to submit a VAT return on time may result in non-compliance and additional inquiries. Furthermore, appropriate transaction segmentation and proper VAT procedures are critical attributes for scrutinization.

Involuntary Disclosures without Supporting Documentation.

You must present voluntary disclosures with a proper explanation and supporting documents. If the FTA is not satisfied with your presentation because of insufficiently attached papers or an increase in voluntary disclosures, they may initiate a further investigation of transactions.

Conclusion

According to the Executive Regulation of Federal Law No. (7) of 2017, every taxable person must retain tax records for at least 5 years or 10 years in certain circumstances. That could mean that the FTA may suggest a tax audit to a taxable person within those five years.

So not preparing for an audit assuming that there is no tax audit for your business is not a may not be a great idea.

Looking For Tax Advice—We can Help!

Flyingcolourtax can assist you in streamlining your tax accounting and reporting activities. We are always delighted to share our value-added tax insights with you and help you execute periodic VAT compliance audits.

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