December 7, 2022Dated: | Byadmin admin | According to the Tax Procedures Law, a tax audit is a process carried out by the Federal Tax Authority (FTA) to examine commercial records or any information or data of taxable persons conducting business in the UAE (federal decree-law no.7). The FTA conducts a tax audit on a taxable person to ensure that the taxable person complies with UAE laws. The VAT law, as well as the tax procedures law, require that the FTA conduct a tax audit to ensure that the taxable person has paid all liabilities and that all taxes due are collected and provided to the government within the time frame specified. What is a tax audit? Taxes such as VAT are self-assessment taxes, which means that the taxpayer is responsible for determining the amount of tax payable, and the input tax that may be recoverable based on the supply made during the periods is sent to the FTA through vat returns. The FTA employs the tax audit procedure to determine whether or not the self-assessed declaration is correct. In some circumstances, the taxpayer could underpay the tax or overclaim the input VAT deduction. In this case, the federal tax authority (FTA) will conduct an assessment and ask the taxpayer to pay VAT in addition to the fines. The timeline for the FTA tax audit. There is no set period of time during which the tax audit will be undertaken, and an audit is not required for every taxable business. FTA will be tasked with choosing which companies to periodically examine. FTA may decide not to conduct a thorough audit of the company. Some of the factors considered when selecting a business for tax audit are as follows:: • Business size and its complexity • Past compliance history of the business • Late return submissions are on the rise • Errors in filing returns and so on Tax audit procedure FTA usually notifies a taxable person 5 business days prior to a tax audit. The probability of notifying would hamper the FTA’s ability to conduct the audit, no notice of tax audit will be given. Tax evasion is also included in this category.. The FTA conducts tax audits at the businesses of taxable persons or in some cases at FTA’s office. The FTA audits usually take place during normal business hours at the taxable person’s place. For the audit to go smoothly, business owners (including their tax advisors or agents) must facilitate and give the tax auditor the required help. The actions that the taxpayer should take after receiving notice of a tax audit are as follows: • relevant premises are accessible • Books of accounts, tax invoices, and other tax records are accessible for examination • Relevant personnel (for example, the person in charge of compiling the tax return) are present. • A duplicate of the original document or invoice If the taxpayer fails to provide the required records or assistance in conducting the tax audit, applicable penalties may be imposed. The FTA will notify the taxable person of the audit results once it is completed. The tax assessment will be issued if the audit results in the determination of any of the following cases: • Failing to apply for the registration within the timeframe specified by the vat law • Failing to submit a tax return on time specified by the vat law • Failure to pay the payable tax shown on your VAT return within the deadline. • Submitting an incorrect vat return • The registrant failing to account for tax on behalf of another person when required by law • The shortfall in vat payable as a result of tax evasion Furthermore, if there is evidence that the findings could result in any of the instances listed in the law, the taxpayers will be subject to administrative penalties.