FTA Audit Preparation in the UAE

FTA Audit Preparation 2026: A Guide to Staying Compliant

Most of the taxpayers are worried about the term FTA tax audit. Though the word might sound stressful if a business is not ready for the same, however, if handled correctly, it does not have to be disturbing. The Federal Tax Authority (FTA) conducts audits to verify VAT, Corporate Tax, Excise Tax, and Tax Procedures compliance, and it will be a legal obligation for the businesses to cooperate to the same.

If we understand rightly, most of the audit issues arise not due to tax evasion, but because of poor documentation, weak internal controls, or lack of readiness.

This blog explains how businesses in the UAE can prepare to face an FTA audit, what the Authority looks for, and how to avoid common pitfalls.

Disclaimer: The examples mentioned in this blog are illustrative and created solely for educational purposes only.

Legal Basis for FTA Audits

FTA audits are conducted based on the following laws:

• Federal Decree-Law No. 28 of 2022 on Tax Procedures

• Federal Decree-Law No. 8 of 2017 on VAT

• Federal Decree-Law No. 47 of 2022 on Corporate Tax

We need to keep in mind that the FTA has the power over the taxable person:

• Access records

• Request for additional information

• Conduct field inspections and visit client premises 

• Issue assessments and penalties

What Triggers an FTA Audit?

There are various reasons through which an FTA Audit can be triggered; however, listed below are the common audit triggers:

• Repeated VAT refund claims

• Significant fluctuations in VAT returns

• Late or inconsistent filings

• Incorrect tax treatments

• Related-party transactions

• High-risk industries and business activities

• Third-party data mismatches

Step-by-Step FTA Audit Preparation in the UAE

Although we know that the taxable person should be prepared for the FTA Audit, most of them are unaware of the sequential requirements to stay prepared. Let us brainstorm on the same.

1️ Organise Your Tax Records

Firstly, it is mandatory that businesses must maintain records for at least 7 years, including:

• VAT returns and workings

• Corporate Tax Computations

• Sales and purchase invoices

• Credit notes and debit notes

• Customs documents

• Bank statements

• Contracts and agreements

 Incomplete records are one of the top-noted audit risks.

2️ Reconcile VAT Returns with Accounting Records

Every taxable person should ensure that their:

• VAT returns match the general ledgers generated

• Output VAT equals the sales invoices

• Input VAT matches the purchase invoices

• Adjustments are all documented on time

Any failure on the above or mismatches will be questioned during the FTA audit.

3️ Review VAT Treatment of Transactions

Every taxable person should focus on these common areas:

• Zero-rated vs standard-rated supplies

• Export of services

• Designated Zone supplies

• Blocked input VAT

• Reverse charge transactions

In case of any errors, correct those before the FTA audit is initiated, if possible.

4️ Review Corporate Tax Positions

Ensure consistency on the financial statements, for Corporate Tax audits, the FTA will review the below:

• Taxable income calculation

• Free Zone qualifying income

• Exempt income (dividends, capital gains)

• Transfer pricing documentation

• Related-party transactions

5️ Prepare Supporting Documentation

During the audit, FTA may request the below:

• Contracts

• Transfer pricing files

• Customs declarations

• Shipping documents

• Bank confirmations

• Internal policies

In case of any missing documents weakens your position to prove yourself in the audit.

6️ Appoint a Tax Agent 

Appointing a registered Tax Agent can help you with:

✔ Handling the FTA communications

✔ Prepare responses and explanations

✔ Attend audit meetings

✔ Minimise penalties and disputes

Practical Audit Example

Given below is one of the practical examples that we have come across.

A trading company claimed high VAT refunds due to its exports. FTA audit requested the below:

• Export invoices

• Shipping documents

• Proof of payment

• VAT reconciliations

Flyingcolour Tax Consultant ensured that proper documentation was submitted and the Audit closed without penalties.

Common Mistakes during FTA Audits

We notice that most of the taxable people ignore certain critical things, thinking they do not have a big impact. However, ignoring it will cost them more. Listed below are some of the common mistakes made during the FTA audits:

• Ignoring FTA notices

• Late or incomplete responses

• Submitting inconsistent data

• No internal audit before the FTA audit

• Handling an audit without professional support

Best Practices to Stay Audit-Ready

Though we talked about a lot of requirements and mistakes during an FTA audit, to summarise it is essential to follow the listed requirements and stay compliant.

✔ Conduct periodic VAT and CT health checks

✔ Maintain digital and physical records

✔ Track deadlines and submissions

✔ Document tax positions clearly

✔ Train staff on VAT & CT basics

How a Flying Colour Tax Consultant Can Help

We being pioneers in the industry, we assist businesses with:

✔ Pre-audit reviews

✔ VAT & Corporate Tax reconciliations

✔ Audit representation before the FTA

✔ Penalty reconsideration

✔ Compliance framework implementation

Frequently Asked Questions (FAQs)

1. Can the FTA audit past years?

Certainly YES, the FTA can audit tax periods within the statutory time limits.

2. How much notice does the FTA give before an audit?

The FTA usually gives a notice of 5 business days, unless an urgent audit is required.

3. Can penalties be reduced after an audit?

Yes, through reconsideration or voluntary disclosure, we can apply for penalties to reduce (if applicable).

4. Is cooperation with the FTA mandatory?

100% Yes. Failure to cooperate with the FTA will attract administrative penalties.

5. Should businesses appoint a tax agent during an audit?

It is highly recommended for technical accuracy and risk mitigation.

To learn more about FTA Audit Preparation in the UAE, book a free consultation with one of the Flyingcolour team advisors.

Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.