With the introduction of the UAE Corporate Tax regime effective from June 1, 2023, businesses operating within the UAE are expected to maintain accurate records, comply with reporting requirements, and submit timely tax returns. As part of ensuring compliance, the Federal Tax Authority (FTA) has the power to conduct corporate tax audits. These audits are designed to examine a company’s financial records, assess the accuracy of reported tax liabilities, and verify compliance with the UAE Corporate Tax Law.
Understanding what to expect during a corporate tax audit is crucial for all businesses—large or small. This guide explains the audit process, key triggers, preparation strategies, and how professional assistance can ease the burden.
What Is a Corporate Tax Audit?
A corporate tax audit is a formal investigation by the FTA into a company’s tax affairs. The objective is to verify whether the taxable income, tax payable, and submitted corporate tax returns comply with the UAE Corporate Tax Law.
Audits may be routine, random, or triggered by discrepancies in filings, unusual transactions, or tips from third parties. The FTA has the right to audit any taxpayer for up to 7 years from the end of the relevant tax period.
Reasons a Business May Be Audited
While audits may occur at random, several factors can raise red flags, including:
- Frequent amendments to tax returns
- Unusual tax deductions or losses over several years
- Mismatch between reported income and bank deposits
- Late filing or failure to submit tax returns
- High volume of related-party transactions
Steps in the Corporate Tax Audit Process
The FTA follows a structured procedure during a tax audit. Here’s what to expect:
1. Audit Notification
The FTA will notify the taxpayer in writing, stating the date, scope, and place of the audit. In some cases, audits can be conducted at the FTA’s premises or at the taxpayer’s place of business.
2. Initial Review of Documents
The FTA may request documents such as:
- Audited financial statements
- Corporate tax return filings
- General ledger and trial balance
- Transfer pricing documentation
- Invoices, contracts, and bank statements
3. On-Site Visit
If required, tax inspectors may visit the business premises. They will conduct interviews, examine systems, and gather further evidence related to tax matters.
4. Findings and Adjustments
After reviewing the evidence, the FTA may issue a tax assessment indicating additional tax due or adjustments to previously reported figures. If errors are found, administrative penalties may also be imposed.
5. Right to Appeal
Taxpayers have the right to contest audit findings through a structured appeals process which includes reconsideration, objection through the Tax Disputes Resolution Committee (TDRC), and court appeals.
Documents You Should Maintain
To be audit-ready, businesses must maintain proper documentation for a minimum of 7 years. These include:
- General ledger, journal entries, and trial balances
- Bank statements and reconciliations
- Supporting invoices for expenses and sales
- Fixed asset registers
- Employee payroll records
- Transfer pricing documentation for related-party transactions
Preparing for a Corporate Tax Audit
Here are essential steps to prepare and ensure a smooth audit experience:
- Conduct regular internal audits
- Use reliable accounting software
- Ensure timely filing and accurate reporting
- Train your finance team on tax compliance
- Engage a tax advisor to review returns before submission
Why PEAK Business Consultancy Services?
PEAK Business Consultancy Services is a premier VAT and corporate tax advisory firm based in the UAE. Our team of certified tax professionals can help you prepare for corporate tax audits, review your filings, and maintain compliance throughout the year.
We provide:
- Corporate tax audit preparation and documentation reviews
- FTA liaison and representation during audits
- Correction of errors and rectification filings
- Transfer pricing support and related-party transaction analysis
- Tax risk assessments and health checks
Visit www.peakbcs.com to schedule a tax audit readiness consultation today.
Common Mistakes That Trigger Tax Audits
- Incorrect classification of income and expenses
- Failure to file corporate tax returns on time
- Underreporting taxable income
- Excessive or non-business-related deductions
- Omission of related-party disclosures
By avoiding these common errors and adopting best practices in record-keeping, businesses can significantly reduce their audit risk.
Post-Audit Compliance and Corrections
If the FTA identifies discrepancies, businesses must pay any additional tax due along with penalties and interest. In cases of unintentional errors, voluntary disclosures can help mitigate penalties. It’s essential to correct your internal systems to prevent future non-compliance.
Working with experts like PEAK Business Consultancy Services ensures you’re always prepared—before, during, and after the audit process.
Click here to partner with PEAK BCS and stay audit-ready throughout the year.
Conclusion
A corporate tax audit in the UAE is a serious process that can impact a company’s operations, finances, and reputation. Preparation is key. By understanding the audit procedures, maintaining proper records, and seeking expert help when needed, businesses can face the FTA with confidence.
PEAK Business Consultancy Services is here to support you with full-spectrum tax compliance and audit preparedness. From documentation to dispute resolution, we stand by your business at every step.
Book a consultation with PEAK BCS now and take control of your corporate tax obligations.
