Preparing for UAE Corporate Tax Audits: What Companies Should Know

The UAE, being the hub of global business, has announced a federal corporate tax regime with the help of the Ministry of Finance (MOF) recently in 2023. This corporate tax system allows the UAE to fulfil the global tax norms while benefiting small businesses. With the incorporation of the corporate tax, it is a high duty of all businesses to follow the rules of UAE corporate tax audits.

A corporate tax audit is basically the examination of the company’s documents, tax filings, and financial records to check if the company is paying the corporate tax accordingly, is working under the law and regulation, and is not being involved in any fraudulent activity. Companies can lose all their reputation if the federal tax authority files any charges and fines, finding them working inadequately, so the preparation for corporate tax audits is necessary.
This piece of blog is going to guide you on all the corporate tax audit tips that you can follow to avoid any penalties.

Eligibility for the Corporate Tax Audit in the UAE:

There is a specific criterion for businesses to be responsible for the corporate tax audit, highlighted by the Ministerial Decision No. 82:

• The first criterion is for businesses whose income exceeds AED 50,000,000; they are subject to the tax audit.
• Businesses that are registered in the free zone are also subject to the corporate tax audit.

It is crucial to understand that the UAE corporate tax service and corporate tax audit keep businesses in regulation and ensure that businesses are in accordance with the laws under the Federal Tax Authority (FTA).

Types of Tax Audits:

There are two types of corporate tax audit:

• Field Audit:

It is the more detailed form of an audit where the auditors visit the company, check the filing, reporting system, and finances. The auditors do a precise examination of each filing and documentation and also interview a few of the employees.

• Desk Audit:

In this type, the auditors don’t visit the site but review the documents, financial records, and other legal files without visiting the business premises.

Maintaining the Records:

Businesses need to keep their logs, like financial records, tax filings, etc., updated to ensure a smooth audit.

• The accounting records should be correct for all the transactions.
• There should be precise records of all the income and expenses.
• Regularly restore or update the accounts to avoid any contradictions.

There are a few things that your business needs to maintain before the audit:

• Financial Report
• Profit statements
• Profit and loss accounts
• VAT records
• Invoices and receipts

Internal Audits:

Before going for the main audit and to avoid any penalties and fines, there are firms in Dubai that allow for the internal audit and help you recognize the shortcomings of the company and provide the company with feedback.

Corporate Tax Audit for SME’s:

Being a small and medium enterprise, there must be problems in keeping good financial and tax filing audits before the original audit. These businesses can seek help from tax consultants and make sure they follow the rules.

Conclusion:

Whereas the new corporate tax law benefits businesses the most, it also keeps businesses on the edge with the introduction of corporate tax audits to ensure that businesses are regulating correctly.

FAQ’s:

1. What documents are required for the audit?

Companies should have the following papers:

• Balance sheets
• Income statements
• Profit and loss accounts
• VAT records
• Invoices and receipts

2. Can companies in the free zone be audited for corporate tax laws?
   

   Yes, free zone companies can be audited if they have earnings outside the free zone.