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A VAT Audit is an official review conducted by the UAE Federal Tax Authority (FTA) to ensure that businesses are complying with VAT laws.
During a VAT audit, the FTA examines a company’s VAT returns, invoices, accounting records, and related documents to verify the accuracy of VAT calculations, payments, and claims.
The audit helps detect errors, inconsistencies, or potential fraud, ensuring that businesses pay the correct amount of tax. It also encourages proper record-keeping and transparency, which benefits both the government and businesses.
VAT audits play a crucial role in ensuring businesses comply with UAE tax regulations. They help verify that VAT is correctly charged, collected, and reported, preventing errors and potential fraud. By conducting audits, the government safeguards its revenue, which supports vital public services.
For businesses, VAT audits encourage proper record-keeping and promote transparency, enhancing credibility with customers, suppliers, and regulators. Regular audits also help companies avoid costly penalties and legal complications by identifying and correcting issues early.
Overall, VAT audits contribute to a fair and transparent business environment, ensuring all companies adhere to the same tax standards.
A tax audit by the Federal Tax Authority (FTA) is a formal review of a business's tax records to ensure compliance with UAE VAT laws. The audit verifies that VAT is correctly calculated, reported, and paid.
Mandatory Deregistration (Required by Law)
The FTA must cancel a VAT registration if:
The business stops making taxable supplies.
The business is no longer required to be registered because its taxable turnover in the past 12 months is below AED 187,500 (the voluntary registration threshold).
A deregistration application must be submitted within 20 business days of becoming eligible.
2. Voluntary Deregistration (Upon Request)
A business may request cancellation of its VAT registration if:
It was voluntarily registered, and
Its taxable turnover has remained below AED 187,500 over the last 12 months.
Approval is at the discretion of the FTA, and certain conditions must be met.
3. FTA-Initiated Deregistration
The FTA can cancel a registration on its own if:
The business fails to meet legal VAT obligations.
The entity is found to have fraudulently registered.
The registered entity is no longer conducting economic activity (e.g., dissolved, closed, or merged).
The company has provided false information to obtain VAT registration.
Consequences of Failing to Deregister
AED 10,000 penalty for not submitting a deregistration request on time.
Continued obligation to file VAT returns until deregistration is approved
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