After the introduction of corporate taxation in the UAE on June 1, 2023, business owners should ensure they are ready for audits from authorities such as the Federal Tax Authority (FTA). Under Ministerial Decree No 82 from 2023 specific firms must file audited financial statements in accordance with new tax legislation for corporations.
Companies looking to avoid fines and ensure an efficient audit process should take proactive measures in their preparation efforts for tax audit. Here are a few key steps that will help prepare yourself for an audit in Dubai. You should consider corporate tax advice and for this purpose corporate tax advisors can be quite helpful.
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Understand Corporate Tax Audit Requirements
Check whether your business complies with audited financial statements required under corporate tax law, as this will enable you to ensure compliance. According to regulations these entities must submit audited financial statements:
- Taxable Persons who have earned over AED 50 million during the tax period of interest will incur penalties of interest of AED 5 million per annum.
- Qualifying Free Zone Individuals
If your business falls within one of these categories, its financial statements should be audited by an accredited public accountant. A report that is audited must contain:
- Balance sheet
- Statement of Income and Cash Flow
- Changes to Equity
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Review Accounting Systems and Records
As part of your audit preparations, it’s critical that you conduct an in-depth audit of your accounting records, systems and tax computations to make sure they are accurate and comply with tax law. Some key areas to evaluate:
- Make sure the financial software you use meets all UAE VAT and corporate tax regulations.
- Check that both input and output tax calculations comply with the corporate tax rate.
- Review VAT returns to ensure they were filed accurately and on time.
- Verify that all tax payments have been submitted within their due dates.
Consultation with an experienced corporate tax consultant can be invaluable in uncovering any problems or gaps in your system and records ahead of an audit.
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Arrange Your Documents
FTA auditors may require you to present various documents and records as evidence of compliance with tax laws. Be prepared and keep these files organized and easily accessible during audits.
- Contracts and agreements for commercial use.
- Purchase and sale invoices.
- Statements from banks.
- Inventory records.
- Fixed assets.
- Payroll data.
- Board meeting minutes.
- Audited financial statements.
Keep these documents easily organized both physically and digitally, reviewing tax procedure laws to ascertain exactly which documents the FTA might request.
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Determine a Point of Contact
Choose an individual in your organization who will act as the main point of contact for FTA auditors, with knowledge about tax matters for your business and authority to provide any required information and documents.
Assure the person responsible is present with any tax professionals or legal representatives to assist auditors and respond to questions throughout the audit. Provide them with the skills and tools to effectively oversee an audit.
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Be Completely Collaborative with Auditors
As soon as an FTA audit begins, it’s essential that employees fully cooperate with auditors. Provide any required documents or records promptly. If any problems or discrepancies arise that need attention from auditors, they should act swiftly in correcting them.
Audits may only take place within FTA business hours unless approved by the Director General for exceptional circumstances. Your company and any of its representatives must assist the auditors during this audit.
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Speak with an Expert in Corporate Tax
Experienced corporate tax consultants in Dubai are invaluable assets when preparing and managing audit processes for businesses. A qualified tax consultant can:
- Review your system, records and tax calculation processes thoroughly to identify any weaknesses.
- Be certain that all required documents are readily accessible and organized.
- Assist your company in communicating with FTA auditors.
- Help in rectifying any discrepancies or problems found during an audit.
An expert tax advisor’s assistance can offer valuable assurance and ensure a swift and seamless audit experience. ebs Chartered Accountants are one of the best corporate tax consultants in Dubai to provide you valuable services.
Companies in Dubai can successfully navigate the tax audit process with proper preparation and guidance. By understanding regulations, reviewing processes, organizing documentation, cooperating with auditors and consulting a tax professional on how best to demonstrate compliance without incurring penalties; keeping an eye on documents while working alongside your tax professional ensure that your business is ready for audits.
FAQs
What are the key requirements for businesses to submit audited financial statements for corporate tax in Dubai?
According to Ministerial Decision No. 82 of 2023, Taxable Persons with revenue exceeding AED 50 million and Qualifying Free Zone Persons must submit audited financial statements for corporate tax purposes in Dubai. These statements must adhere to IFRS accounting standards and cover a 12-month period unless special circumstances require a shorter or longer period.
What is the corporate tax audit process like in Dubai?
The corporate tax audit process in Dubai involves the Federal Tax Authority (FTA) reviewing the company’s corporate tax returns and other information without any specific reason. The FTA auditor will schedule a meeting with the company to begin the audit process and may request business documents and take samples of goods and assets. If irregularities are found, the FTA can mandate a re-audit.
What are the benefits of undergoing a corporate tax audit in Dubai?
The key benefits of a corporate tax audit in Dubai include ensuring the company is paying the correct amount of tax, identifying potential areas of tax risk, providing recommendations to improve tax compliance, enhancing the company’s credibility and reputation, detecting and preventing fraud or errors, and uncovering opportunities for improving business operations and identifying growth potential.
