What is VAT Audit?
The Federal Tax Authority (FTA) at it’s discretion, might issue a notice to any taxable person for a VAT Audit. A VAT Audit is done by the government to ensure if a business has complied with the VAT laws and regulations. FTA will notify a business subject to audit 5 days in advance.
How to stay Audit Compliant?
Your tax consultant should:
Review Internal Financial System: The primary task any business has to entail is to make sure that the books of accounts are prepared as per rules, is to set up accounting software. Every business shall make sure that a well-established financial system is in place.
Review VAT Calculations and Payment: The VAT payable depends on the input and output tax. A company shall compute the same after considering type of supply, place & time of supply. VAT Payable = Output Tax – Input Tax
Review Business Transactions: There are 4 types of applicable VAT on a transaction –
i. 5% rated
ii. Zero (0%) rated
iii. Exempt
iv. Out of scope
It is highly important to make sure each transaction has the correct VAT applied to it.
Review VAT Returns: The VAT return filing is a mix of all the above points; considering VAT payable, input & output tax, VAT applicable on a transaction, VAT returns are to be filed. Any mistakes in VAT Returns filing could prove costly.FTA expects full compliance during a Tax Audit. A tax consultant can guide you through this examination from the FTA.
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