Federal Tax Authority mandated to audit tax compliance in the UAE

The provisions of the newly issued federal law on taxation have mandated the Federal Tax Authority (FTA) with the legal right to perform a tax audit on any person to determine their compliance with the provisions of the relevant laws.

The FTA may perform the audit at its office or the place of business of the person or any other place where they conduct business, store goods or keep records, in which case, the person must be given a prior notice of at least five business days.

While conducting a tax audit, the tax auditor may ask for original records or copies thereof, or take samples of the goods, equipment or other assets available at the person’s place of business. The tax audit will be conducted during the official working hours of the authority. The Director General may, by way of exception, issue a decision to conduct the audit outside regular hours if necessary.

The authority may order a re-audit if new information surfaces that might impact the outcome of the tax audit. Any person subject to a tax audit, as well as his tax agent or legal representative, must offer all required assistance to the tax auditor to perform his/her duties.

Protecting taxpayers’ rights

The new law has granted the right to audited person to request the tax auditors to show their professional identification cards; obtain a copy of the tax audit notification; attend the auditing procedures that take place outside of the authority’s headquarters; and obtain copies of any original paper or digital documents removed or obtained by the FTA during the tax audit.

The authority must issue a tax assessment to determine the value of payable tax and serve it on the taxable person within five working days of its issuance in any of the following cases: if the taxable person fails to apply for registration within the time frame specified by the tax law; if they fail to submit a tax return within that time frame; if they fail to pay the tax stated as payable on the submitted tax return before the deadline; if the taxable person submits an incorrect tax return; and if the registrant fails to calculate tax on behalf of another person when they are obligated to do so by the tax law.

The law addresses conflict of interest, prohibiting all authority staff members from performing or participating in any tax procedures related to any person in cases where if the staff member and that person are related up to the fourth degree; if there is a common interest between the staff member and person or between any of their relatives up to the third degree; and if the Director General decides that the staff member should not perform any tax procedures related to that person owing to a case of conflict of interest.

Employees of the authority are bound by non-disclosure clauses and are prohibited from disclosing information that they obtained or to which they had access in their capacity as employees (save as specified or defined in accordance with the executive regulations).

The law requires FTA employees to maintain professional confidentiality after cessation of their services, and are prohibited from disclosing information that they obtained or to which they had access in their capacity as employees, unless otherwise requested by the judicial authorities and in accordance with the executive regulations. Any person who has obtained information pursuant to the provisions of the law is not to disclose or use the said information for any purposes other than those for which the information was obtained.

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