FTA Tax Audits: How Businesses Can Prepare and Stay Compliant

The Federal Tax Authority (FTA) in the UAE conducts tax audits to ensure businesses comply with tax regulations, including VAT and corporate tax. These audits assess whether companies are accurately filing returns, maintaining proper records, and fulfilling their tax obligations.

Many businesses underestimate the complexity of an FTA tax audit, assuming that submitting tax returns on time is enough to avoid scrutiny. However, tax audits involve a detailed examination of financial records, invoices, and transactions, and failing to meet compliance requirements can lead to penalties, fines, or even legal consequences.

1. What Is an FTA Tax Audit and Why Is It Conducted?

An FTA audit is an official examination of a company’s financial records and tax filings to verify that tax obligations have been correctly reported and paid.

The main objectives of an FTA audit include:
Ensuring tax compliance – Businesses must adhere to all tax regulations.
Identifying discrepancies – Mismatches between reported figures and actual transactions can indicate errors.
Preventing tax evasion – Detecting deliberate underreporting or fraudulent tax practices.
Verifying tax refunds – Ensuring VAT refunds claimed by businesses are legitimate.

2. How Does the FTA Select Businesses for Audits?

The FTA conducts tax audits based on various risk factors, including:

1. Random Selection

• The FTA can conduct random audits to ensure businesses comply with tax rules, regardless of past compliance.

2. Discrepancies in Tax Filings

• If the figures in tax returns, invoices, and financial statements don’t match, it can raise red flags.
• Large fluctuations in VAT input and output claims can also trigger an audit.

3. Unusual Tax Refund Requests

• Businesses that frequently request large VAT refunds may be audited to verify the legitimacy of their claims.

4. Late or Irregular Filings

• Consistently late VAT or corporate tax filings can make a company more likely to be audited.

5. Industry-Specific Risks

• Certain industries with high cash transactions or complex supply chains are more likely to be audited.

3. What Documents and Records Must Businesses Maintain?

Businesses should always be audit-ready by maintaining accurate and organized tax records. The key documents required for an FTA audit include:

1. Financial Statements

Balance sheet
Profit and loss statement
Cash flow statement

2. Invoices and Tax Records

Tax invoices issued to customers
Purchase invoices from suppliers
Credit and debit notes

3. Bank Statements & Payment Records

Bank transactions matching tax filings
Payment receipts for VAT submissions

4. Audit Trail for Adjustments

Any manual tax adjustments should be backed by proper documentation and explanations.

Keeping these records organized and readily available can significantly reduce stress during an audit.

4. How to Prepare for an FTA Audit

Preparing for an FTA audit involves proactive tax management and ensuring that all records are in order. Here’s how businesses can successfully handle an audit:

1. Conduct Internal Tax Audits

Perform regular self-audits to identify errors before an official FTA audit.
Compare VAT returns with actual invoices and financial statements.

2. Maintain Digital Tax Records

Store invoices, bank statements, and tax filings in cloud-based systems for easy retrieval.
Ensure electronic invoices comply with FTA requirements.

3. Respond Promptly to FTA Requests

Businesses must respond within the deadline if the FTA requests documents or explanations.
Delays or incomplete responses can prolong the audit process.

4. Seek Professional Tax Guidance

If an audit is triggered, consult tax experts to ensure all compliance requirements are met.
Tax professionals help identify potential risks, errors, and missed opportunities.

5. Keep an Audit-Ready Mindset

Businesses should always assume they could be selected for an FTA audit at any time.
Regularly update tax policies and train finance teams on compliance requirements.

5. How Fandeez Helps Businesses Navigate FTA Audits

Handling an FTA audit can be stressful, but Fandeez provides expert guidance to help businesses comply with tax regulations and avoid penalties.

Pre-Audit Assessments

We review your tax filings, invoices, and records to identify risks before an FTA audit.

Audit-Ready Tax Compliance

Our tax professionals ensure your VAT and corporate tax filings are accurate and fully compliant.

FTA Audit Support & Representation

If selected for an audit, we assist with document preparation, audit responses, and FTA negotiations.

Training & Ongoing Compliance

We provide tax compliance training for businesses to prevent future errors and penalties.

Final Thoughts: Be Proactive, Not Reactive in FTA Audits

An FTA audit is not just about verifying tax filings—it’s about ensuring transparency, accuracy, and compliance. Businesses that maintain proper records, file accurate returns, and stay updated with tax regulations can avoid penalties and pass audits smoothly.

By partnering with Fandeez, businesses can stay audit-ready, avoid costly mistakes, and ensure seamless compliance with tax regulations.

Need help preparing for an FTA audit? Contact Fandeez today for expert tax compliance and audit support.