{"id":1247,"date":"2019-06-25T09:57:27","date_gmt":"2019-06-25T05:57:27","guid":{"rendered":"https:\/\/www.bayzat.com\/blog\/?p=1247"},"modified":"2022-09-07T10:11:13","modified_gmt":"2022-09-07T10:11:13","slug":"fta-audits-what-should-you-expect","status":"publish","type":"post","link":"https:\/\/www.bayzat.com\/blog\/fta-audits-what-should-you-expect\/","title":{"rendered":"FTA Audits – What should you expect?"},"content":{"rendered":"\n

Source: SimplySolved Accounting & Tax Solutions<\/h3>\n\n\n\n

As the VAT system settles in the UAE during 2019, the FTA is likely to increase its focus on audits. In this blog, we discuss the key questions that better answer the key questions surrounding an FTA audit. <\/p>\n\n\n\n

What is a VAT Audit? <\/h3>\n\n\n\n

Under the Organisation for Economic Co-operation and Development (OECD) guidelines, an audit is defined as: \u201cExamination of whether the taxpayer has correctly assessed and reported their tax liability and fulfilled other obligations.\u201d Under a self-assessment system, audits are considered essential to promote voluntary compliance and: <\/p>\n\n\n\n

\u2022 Identify non-compliance to the Legislation <\/p>\n\n\n\n

\u2022 Gather intelligence on the state of the tax system. <\/p>\n\n\n\n

\u2022 Gather supply chain information (an audit on any business could trigger an audit on another business) <\/p>\n\n\n\n

\u2022 Educate businesses and assist on implementation of the law and identify areas that require may require clarification <\/p>\n\n\n\n

The tax authority will require access to accounting records, documentation and personnel to conduct their audit. <\/p>\n\n\n\n

Some Misconceptions <\/h3>\n\n\n\n

Your business may have filed your VAT returns and in some cases received refunds without any audit procedure. <\/p>\n\n\n\n

This does not necessarily mean the FTA has accepted any non-audited business as compliant. They reserve the right to audit any business for up to 5 years, hence it should be your responsibility to remain compliant and proactive to any changes to the Legislation.<\/p>\n\n\n\n

When & What triggers an Audit?<\/h3>\n\n\n\n

An audit can be triggered by a variety of factors and may not be solely determined by the size of the business. The timing for any audit cannot be predicted, nevertheless, several criteria most likely lead to an audit:<\/p>\n\n\n\n

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What are the Legislative Powers?<\/h3>\n\n\n\n

The Legislation grants the FTA wide-ranging powers to ensure compliance is met. These powers (set out across six documents issued under the VAT Legislation) grant the FTA powers to compel businesses to full disclosure and also subject penalties for non-compliance. In terms of the specific audit procedures, the law grants:<\/p>\n\n\n\n

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What are The Audit Procedures?<\/h3>\n\n\n\n

It is likely the FTA will conduct an audit in the following manner. At each stage the penalty assessments increase for any disclosures affecting underpaid taxes or noncompliance.<\/p>\n\n\n\n

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Initially, the emphasis may be on remote, desk-based audits where system data and documentation provide is the primary assessment model. If this is considered unsatisfactory, an onsite audit may occur which will require further preparation.<\/p>\n\n\n\n

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How Should You Prepare?<\/h3>\n\n\n\n

It is incumbent on the business to demonstrate compliance under audit. Nothing should be presumed, and comprehensive preparation is the key. <\/p>\n\n\n\n

Under an audit the FTA will seek to establish:<\/p>\n\n\n\n

\u2013 Summary understanding of your business and how it operates<\/p>\n\n\n\n

\u2013 The accuracy of recording and rating your sales & purchase transactions<\/p>\n\n\n\n

\u2013 How you manage your sector risks e.g. customs processes, cash risks<\/p>\n\n\n\n

\u2013 Management of your supply chain and the completeness of data<\/p>\n\n\n\n

\u2013 Governance, process and controls implemented across your business <\/p>\n\n\n\n

Ensuring comprehensive documentation furnished on time is advised to demonstrate sufficient controls are implemented to internal processes, systems and personnel.<\/p>\n\n\n\n

Ideally you should test your test returns for accuracy and target areas that are easy wins under an audit. <\/p>\n\n\n\n\"Free<\/a><\/span>