What is a VAT Audit?
A procedure undertaken by FTA to inspect the commercial records or any information or data related to a Person conducting Business.
Commercial records include accounting books in relation to that Business, which include records of payments and receipts, purchases and sales, revenues and expenditures, Balance sheet and profit and loss accounts, Records of wages and salaries, Records of fixed assets, Inventory records and statements (including quantities and values) at the end of any relevant Tax Period and all records of stock-counts related to Inventory statements. Any records as may be required in the Tax Law and its Executive Regulation.
Procedure for a VAT Audit
(i) The right of the FTA to perform a VAT Audit
The FTA may perform a VAT Audit on any Person to verify the extent of that Person’s compliance with the provisions of this Law and the Tax Law. The FTA may perform the VAT Audit at its office or the place of business of the tax payer or any other place where such Person conducts Business, stores goods or keeps records. If the FTA decides to perform a VAT Audit at the place of Business of the taxpayer or any other place where such Person conducts his Business, stores goods or keeps records, the FTA shall inform him at least five business days prior to the VAT Audit.
The Tax Auditor has the right of entry to any place where the Taxpayer conducts his Business, stores goods, or keeps records, and as the case may be, it will be temporarily closed in order to perform the VAT Audit for a period not exceeding 72 hours without prior notice in any of the following cases:
- If the FTA has serious grounds to believe that the Taxpayer is participating or involved in Tax Evasion in respect to this Person or another Person;
- If the FTA has serious grounds to believe that not temporarily closing the place where the VAT Audit is conducted will hinder the conduct of the VAT Audit;
For temporary closure of Taxpayers business, the Tax Auditor shall obtain the prior written consent of the Director-General; and if the place to be accessed is a place of residence, then a permit from the Public Prosecutor shall also be obtained.
Places shall be reopened after the lapse of 72 hours, unless the FTA obtains a permit from the Public Prosecutor to extend the closure period for a similar period prior to the expiry of the preceding 72 hours.
(ii) The Right of the FTA to Access the Original Records or Copies Thereof During a VAT Audit
While conducting a VAT Audit, the Tax Auditor may obtain the original records or copies thereof, or take samples of the stock, equipment or other assets from the place at which the Taxpayer conducts his business or which are in his possession, or may seize them.
(iii) Timing of the Audit
A Tax Audit will be conducted during the official working hours of the FTA. In cases of necessity, a VAT Audit may be exceptionally conducted outside of these times by a decision of the Director-General.
(iv) New Information Surfacing after a VAT Audit
The FTA may audit any issue previously audited if new information that might impact the outcome of the VAT Audit surfaces.
(v) Cooperation during the VAT Audit
Any Person subject to a VAT Audit, his Tax Agent or Legal Representative shall facilitate and offer assistance to the Tax Auditor to enable him to perform his duties.
(vi) The Rights of The Person who is Subject to VAT Audit
The taxpayer shall have the right to:
- Request the Tax Auditors to show their job identification cards.
- Obtain a copy of the VAT Audit Notification.
- Attend the VAT Audit which takes place outside the FTA.
- Obtain copies of any original paper or digital documents seized or obtained by the FTA during the VAT Audit, according to what is specified in the Executive Regulation of this Law.
(vii) Notification of the VAT Audit Results
The FTA shall inform the Taxpayer of the final results of the VAT Audit. The Taxpayer may view or obtain the documents and data on which the FTA based its assessment of Due Tax.
Role of a Tax Agent
A tax Agent can assist you in getting organized before the FTA, they can represent you before the FTA, it will save your time and a professional representation will enable you to successfully conclude your audit. Before starting of an audit it is best to get your VAT returns verified form a Tax Agent.
ADJC is pronounced Tax Agent and we can help you in review of your business systems, authenticity of your VAT returns, VAT calculations and payments, maintenance of your books and records as per FTA requirements. There are heavy penalties for non-compliance of VAT laws.