An FTA or VAT Audit happens when the FTA finds some errors in a tax return. It is the job of FTA to schedule the audit for the returns. These were filed in the last five years. They may vary from business to business. If FTA finds an error, it will do the back-calculation and back-review. Many factors can start an FTA audit. If it is found that you’re showing a greater amount of losses compared to previous so many years, or if there is sudden extraordinary profit under the scanner, it triggers an audit from the FTA. These are the factors which are known as risk factors in the parlance.
Tax Audit Procedure
There is a particularly specific way of audit that starts the initiative of FTA. If there is a chance of an audit, there will be a notice served on you at least 5-days before so that you can be ready with your papers, documents and consultants. You may have to defend your position with the submission of some relevant documents. You might have received a notice that mentioned there have been errors in your filings. You can refute these charges with some substantial proof. You should take help of some legal experts to sail you through the process hassle-free.
The auditor will peruse your records and go through the calculations made at your end and try to make sure there are no discrepancies. The whole purpose is to oversee whether you have complied with the norms of taxation or not. The chances of getting a notice for auditing is feeble but it may happen any moment. You should have selected a consultant beforehand who would stand by your side and fight your case. There are some special cases, such as a suspected criminal offence having been found committed at your end, where there is no need for a notice. It will happen all of a sudden. The site of the audit may be the place of business or somewhere else. It the audit has to happen at auditor’s place, it will be within the working days and times.
Once the audit begins, the assessed person has to cooperate with the auditors; otherwise it will go against the person. The legal assistant or legal aid should help the auditor in carrying out his work.
The premises must be accessible to the auditors. The tax records such as books of accounts should be accessible for examination by the auditor. The staff conversant with the matter should be present to facilitate the audit. You must have original copies of the documents with you. In case you fail to do all these, there will be a penalty imposed on you.
Administrative Penalties under Tax Law by FTA
After the completion of the audit, the FTA will inform you about the outcome of the audit. In the following cases the tax assessment will be issued:
- If you fail to apply for registration within a period as mentioned in the VAT law.
- Failing to submit the return within the time-frame.
- In case you fail to settle the amount of tax payable.
- If you submit an incorrect tax return.
- You fail to account for the tax on behalf of another person.
There may be penal actions initiated against you if these are according to the provisions of tax law.
Taxes are very important for a country because the revenue from them is utilized in the development of the nation. Thus, a country needs to conduct tax assessment from time to time to check whether a company is concealing an income. The government will come to know if the company is involved in any tax fraud.
So, a tax audit is a way that is employed by the government to assess the responsibility of a person towards paying statutory payments for running a business. This is done by the federal tax authority. This is an important job because the growth of a nation depends a lot on the collection of revenue. For help with auditing, accounting, VAT registration and VAT filing of returns, contact GCC Filings, a one-stop solution for businesses willing to do business in the UAE.