Why does the FTA conduct a Tax Audit?

FTA audits are performed in the UAE to ensure that firms are following tax rules and regulations, such as VAT (Value Added Tax) and Excise Tax. These audits might be performed at random or when the FTA detects noncompliance or fraudulent activities.

The authority will check the company’s records, financial statements, and other necessary documents during an FTA audit to confirm that taxes have been correctly computed, declared, and paid. If there are any disparities or non-compliance issues, the corporation may be obliged to pay additional taxes, penalties, and interest.

Companies can fall under FTA audit scanner for a variety of reasons. Some of the common reasons are:

• Random selection: The FTA may select a company for audit on a random basis as part of their routine compliance checks.
• Non-compliance: If a company is suspected of not complying with the tax laws and regulations, the FTA may initiate an audit to verify if the company is accurately reporting and paying their taxes.
• High-risk industries: Certain industries are considered to be high-risk, and companies operating in these industries may be more likely to be audited. For example, industries such as construction, real estate, and retail are often subject to audits.
• Unusual activities: If a company engages in unusual activities or transactions, the FTA may initiate an audit to verify if these activities are compliant with tax laws and regulations.
• Past non-compliance: If a company has a history of non-compliance, the FTA may initiate an audit to ensure that the company is now in compliance with the tax laws and regulations.

To avoid penalties and other legal consequences, firms must keep accurate and comprehensive records and follow all tax requirements.

If you already received an audit notification or are expecting to receive one, as per the latest trends we have seen, ITC can assist you in preparing for an audit by performing a tax health check on the period since you registered for the tax until the present.