We have recently observed an increase in audit activity initiated by the UAE Federal Tax Authority (FTA) in relation to corporate tax matters.
No Clear Risk Pattern Identified
At this stage, no clear pattern can be identified as to the categories of taxpayers being selected for audit. Notifications have been received by both free zone and mainland entities. The methods of communication used by the FTA vary and include email correspondence, formal written notices, and telephone contact, in some cases followed by on-site visits by FTA officers.
Broad Information Request
Based on recent cases, the scope of document requests issued at the initial stage of an audit appears to be broad rather than targeted. By way of example, some taxpayers have been asked to provide “all invoices” supporting certain expense deductions, where the relevant expense categories were defined very widely. This has resulted in the need to compile and submit a substantial volume of documentation. The FTA typically allows three to five working days for submission, which may pose operational challenges given the scale of information requested.
The provision of adequate and satisfactory documentation during an audit is critical. Under the applicable legislation, the FTA has the authority to disregard documentation it considers insufficient and to issue tax assessments based on its own methodologies.
What should taxpayers do now?
It is also important to note that the submission of a voluntary disclosure after receipt of an audit notification triggers an automatic penalty of 15% of the tax difference identified.
UAE tax procedural law emphasizes proactive compliance and ongoing self-assessment of tax positions adopted by taxpayers. In light of the above developments, taxpayers may wish to consider reviewing their previously submitted tax returns and, where appropriate, making voluntary disclosures promptly.
How can we help?
AMERELLER regularly assists clients with tax health checks aimed at identifying potential risk areas in existing filings and advising on appropriate remedial steps. Should you wish to discuss the potential implications of these developments for your business, or require assistance in reviewing your corporate tax position, please do not hesitate to contact your usual AMERELLER contact or any member of our tax team.
If you wish to have a chat on how those changes can affect your business and how to prepare, please feel free to contact us.
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DUBAI | AMERELLER Legal Consultancy LLC SOC | One by Omniyat, 14th Floor | Business Bay | P.O. Box 97706 | Dubai, United Arab Emirates | T +971 4 432 3671
RAS AL KHAIMAH | AMERELLER TAX Consultancy FZ-LLC | Ras Al Khaimah Economic Zone | P.O. Box 16462 | Ras Al Khaimah, United Arab Emirates | T +971 7 204 6255
