Tax Audit is an examination of liability of a taxable person by the Federal Tax Authority. Tax Audit is conducted by the authority to check whether the tax liability is paid within the due date and whether such liabilities are properly arrived as per the provisions of the relevant laws such as UAE VAT law, UAE Excise Tax law, etc.
What are our roles in Tax Audit?
The Tax Auditor may do the tax audit either by visiting the taxable persons’ location or by asking certain documents to submit to the authority for tax audit. It is the responsibility of a taxable person to comply with the requirements of the provisions of the tax laws. Al Nuaimi Auditors as TAX experts guide and support the taxable persons in the UAE to comply the tax requirements so that the business will be ready to face tax audit at any time by the authority. Our review of documents, systems and procedures of a taxable person on compliance of Tax laws is known as Tax Compliance Review.
How we proceed with VAT Compliance Review?
Accounting and operational software system review: Proper accounting software is mandatory in an organization to ensure that it complies the UAE VATlaw which will result that there is no discrepancy during a tax audit by a tax auditor. We check whether the accounting software used in the company is capable of handling:
Proper Tax Invoice
Proper Tax Credit Note
Proper Accounting on Reverse Charge (RCM while importing goods / services into the UAE)
Calculation of Output Tax
Recording of Input Tax
Review of compliance of Output Tax:Review of calculation of Output Tax includes the following
Whether all taxable supplies at standard rated are charged at respective tax rate. (as of now 5%).
To ensure that only eligible zero-rated supplies are charged as zero-rated and proper supporting documents are maintained.
To ensure that out of scope supplies if any are accounted properly.
To check whether the goods imported into the UAE through UAE customs are recorded under Reverse Charge Mechanism
To reconcile the amount shown in FTA records as value of goods imported and the output liability on such imports with the records shown under the books of accounts.
To check whether the services if any imported from outside the UAE are recorded under Reverse Charge Mechanism.
To check whether only the eligible input credit is taken against such import of materials or goods under reverse charge mechanism.
To check whether exempted supplies if any are recorded and reported properly.
Review of compliance of Input Tax: Input tax claimed by the taxable person has to be properly reviewed to ensure that no discrepancies are detected during the tax audit. We exercise verification such as:
Whether only eligible input credits on purchases and expenses are claimed.In the case of mixed supplies (exempted and zero rated / standard rated) whether the input credit is calculated as per the formula provided under the law.
Whether input credit on import of goods and services are calculated and claimed properly.
Review of periodical VAT returns: Our tax experts will review the Vat returnfiles to be submitted to the authority and make sure that:
The entire output tax payable to the authority are recorded properly.
Only eligible amount is claimed as input credit.
The reporting of output tax under reverse charge are recorded properly.
Zero rated supplies and exempted supplies are recorded separately.
Additional reporting such as profit margin scheme, etc., are reported properly.
Payment of Tax due amount:to check whether the due tax amount is paid to the tax authority before the due date periodically.
Summary: Tax audit is the verification from the part of the Federal Tax Authority. Al Nuaimi Auditors as tax experts are available in all Emirates in the UAE to support and guide the entities to ensure that they comply the UAE VAT law, Excise tax law , for smooth functioning of a tax audit.