An Overview of UAE’s FTA Vat Audit 2024 for Businesses Entities


1) Introduction

Businesses in the UAE need to prepare for the Federal Tax Authority’s (FTA) scrutiny as the mandatory tax audits of 2024 get nearby. VAT laws and regulations must be followed since the Free Trade Area has the legal authority to carry out tax audits to verify compliance with pertinent provisions. Despite the common misperception, completing a VAT return does not mean compliance is complete; instead, it is merely the first step in getting ready for a tax audit.  This article presents us with an overview of the FTA Tax Audit and requirements for the same

2) What is UAE Tax Audit?

According to the UAE Tax Procedure Law, a tax audit is a procedure that is carried out by the Federal Tax Authority (FTA) to examine commercial records or data set by the taxable person. There are different aspects considered under this-

  • Determine which companies are not by the law.
  • Acquire information about the condition of the tax system. 
  • Acquire details about the supply chain (ask one company’s conduct may lead to another’s). 
  • Inform companies, help with the law’s implementation, and point out any areas that could need clarification.

FTA keeps a tab on every person falling under the tax regime. In 2022, FTA’s inspection teams conducted 21,841 field inspections in local markets across the UAE. There was a growth in the overall inspection by the FTA compared to 2020 across UAE Markets. 

3) What are the Requirements for the UAE VAT Audit?

Every person or entity falling under the UAE VAT audit needs to fulfil specific requirements to present it before the tax auditor. Some of these are-

  • Supplies & Imports records
  • Tax invoices and documents of goods & services.
  • All tax invoices.
  • Records of exported goods and services

Besides, the UAE Tax Audit FTA will seek for:

  • Concise explanation of the company’s operations
  • How accurately your sales and purchase transactions are recorded and rated?
  • How do you handle sector risks, such as cash risks and customs procedures?
  • Handling your supply chain and the accuracy of the information

You need to check with the FTA audit team whether the conversion of sole establishment into an LLC will have any VAT impact. This will help you collect documents and fill in the requirements.

4) What is the Timeline for Tax Audit?

Not all VAT-registered businesses are subject to audits, and the frequency of tax audits is not set in stone. The FTA will periodically choose the companies that must undergo an audit. The FTA retains the right to decide whether to conduct a thorough audit of the companies. The following are some of the variables taken into account when choosing a company for a tax audit.

  • How big or intricate is the company?
  • The company’s prior record of compliance
  • The propensity for late return submission

A large company that sells a lot of items and needs a better compliance record, for instance, is more likely to be the target of a tax audit than a small company that has excellent compliance records.

5) What are the Guidelines for the FTA UAE Tax Audit 2024?

Since the timeline for 2024 FTA UAE Tax audit 2024 is set, there are specific guidelines set. Some of these are-

  • Check Standard-Rated Taxable Supplies: Make sure the correct tax rate is applied to all standard-rated taxable supplies.
  • Zero-Rated Supplies: Ensure that only supplies that meet the eligibility requirements are accurately invoiced and accompanied by the necessary paperwork.
  • Reverse Charge Mechanism: Verify that only qualified input credits are claimed and that services imported from outside the United Arab Emirates are tracked under this mechanism.

An Overview of UAE’s FTA Vat Audit 2024 for Businesses Entities

6) Import Compliance

Reverse Charge Mechanism for Imports: Verify that products that are brought into the United Arab Emirates via UAE customs are appropriately registered under the Reverse Charge Mechanism.

Data reconciliation using accounting: Adjust the import values and output liabilities in the FTA records to match the information in the books of accounts.

7) What are the Powers that hold UAE FTA?

There is a certain power, helped by the FTA, granted by UAE legislation to ensure that the tax regime is well-set. Some of these are-

  • Federal Decree-Law No. (13) of 2016 On the Establishment of the Federal Tax Authority
  • Examine the tax returns and reports that have been filed with the FTA, conduct an audit of them, determine whether to approve or change them, or ask for more information or documentation.
  • Demand access to any data or information that a third party may hold and that could be required for the tax audit process, including details about an individual who is the subject of the audit.
  • Cabinet Decision No. (36) of 2017 on the Executive Regulation of Federal Law No. (7) of 2017 on Tax Procedures

Accounting book records of receipts and payments, sales and purchases, income and expenses, and any business, as well as any information needed by any applicable tax legislation or other regulation, such as:

  • Accounts for profit and the balance sheet
  • Salary and pay records.
  • Documentation fixed assets

8) How NRD can Help?

With NRD by your site, your business can find mistakes, omissions, and possible problems in VAT returns. NRD is a registered Tax Agency approved by the FTA. By taking this proactive measure, the possibility of fines and penalties in the event of an FTA Tax Assessment is reduced. In-depth tax health checks, covering taxes and associated internal controls, are offered by our skilled tax professionals to make sure clients are ready for audits.

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