As per Federal Decree-Law no. 7 on taxation the Federal Tax Authority (FTA) has the legal right to perform a tax audit on any person to determine their compliance with the relevant provisions of the law
FTA can initiate a VAT audit for checking any potential errors or non-conformities. Usually, the FTA schedules audit for tax returns that were filled in the previous five years; it may vary for businesses dealing with real estate, etc.
Some factors that may trigger FTA Audit
- Falling in the sample companies FTA draws for audit
- Claiming multiple or large input refunds
- Multiple filing of voluntary disclosure applications, etc.
What are the Penalties if FTA finds out a Tax Violation?
Late registering for VAT: AED 20,000
Late deregistration from VAT: AED 10,000
Late filing of VAT Return: AED 1,000 first time, AED 2,000 upon repetition.
Late payment of VAT liability for delay of payment: from 2% up to 300%
Not maintaining financial records: AED 10,000 for the first time, AED 50,000 upon repetition.
Submission of Incorrect Tax return: AED 3,000 for the first time, AED 5,000 upon repetition.
Tax Violations in UAE will also lead to the business’s shutting down entirely and the cancellation of the Trade license.
How to get ready?
FTA can conduct audits anytime. So, it is advisable for all UAE business entities to prepare themselves for TAX Audit promptly as FTA allows only 5 days to respond to their queries.
How can AM Audit help?
AM Audit provides a broad array of tax services, which is comprised of review and analysis of the complete status of your tax. We advise you on the best solution to remove non-compliance and inconsistencies in your tax record. These services prepare a company to fulfill all the shortcomings and non-conformities to the legal provisions and documentary requirements.
Our experts will examine your documentation and advise the best solutions to comply with the tax law.
