Why FTA Audits Matter More Than Ever in Dubai
If you operate a business in Dubai, an FTA audit is not a matter of “if” but “when.”
With the UAE’s tax framework maturing and digital oversight increasing, the Federal Tax Authority (FTA) has significantly expanded audit activity across VAT, Corporate Tax, and Excise Tax.
Many businesses mistakenly believe that filing VAT returns on time is enough. In reality, FTA audits focus on accuracy, documentation, systems, and compliance behavior, not just submission dates. Even profitable, growing companies face penalties due to poor record-keeping, incorrect VAT treatment, or weak internal controls.
Dubai based businesses are under heightened scrutiny due to:
• High transaction volumes
• Cross border trade
• Free Zone and Mainland interactions
• Corporate Tax implementation from 2023 onwards
At Nines Consultancy, we see audits triggering penalties not because of fraud, but because businesses were unprepared.
This guide explains what FTA audits in Dubai involve, why they happen, common audit triggers, and exactly how you can stay prepared.
What Is an FTA Audit in the UAE?
An FTA audit is a formal review conducted by the Federal Tax Authority to verify whether a business has correctly:
• Registered for tax
• Calculated tax liabilities
• Filed accurate returns
• Maintained proper records
• Paid taxes within deadlines
FTA audits can cover:
• VAT
• Corporate Tax
• Excise Tax
• Past tax periods (up to 5 years, or longer in specific cases)
Audits are conducted under Federal Decree-Law No. 28 of 2022 (Tax Procedures Law).
Types of FTA Audits Conducted in Dubai
1. Desk Audit (Remote Audit)
• Conducted online or via email
• Requests specific documents
• Common for first-time audits
2. Field Audit (On-Site Audit)
• FTA officials visit your office or warehouse
• Physical verification of records, inventory, and systems
• More detailed and time-intensive
3. Thematic or Sector-Based Audits
• Targeted audits for specific industries
• Common in construction, trading, logistics, hospitality, and e-commerce
Why the FTA Selects Businesses for Audit in Dubai
FTA audits are risk based, not random.
Common Audit Triggers
• Large VAT refund claims
• Repeated VAT return amendments
• Late VAT filings or payments
• Mismatch between VAT returns and financial statements
• High zero rated or exempt supplies
• Related party transactions
• Rapid revenue growth
• Free Zone vs Mainland VAT inconsistencies
• Poor bookkeeping or missing records
Even fully compliant businesses may be audited as part of sector-wide checks.
Legal Authority of the FTA During an Audit
During an audit, the FTA has the right to:
• Access accounting systems
• Review contracts and invoices
• Inspect warehouses and stock
• Request bank statements
• Interview staff
• Seize documents if required
Failure to cooperate can lead to additional penalties, even if tax calculations are correct.
Key Documents Required During an FTA Audit
Being audit ready means having organized, retrievable, and accurate records.
Mandatory Records Include:
• VAT returns and payment confirmations
• Sales and purchase invoices (tax-compliant format)
• Credit and debit notes
• Bank statements
• General ledger and trial balance
• Contracts and agreements
• Customs declarations (for import/export)
• Inventory records
• Fixed asset register
• Corporate Tax working papers (if applicable)
• FTA correspondence history
FTA requires records to be retained for at least 5 years, and 7 years for real estate-related VAT.
Common Mistakes That Cause FTA Penalties
Many Dubai businesses are penalized due to avoidable issues.
Frequent Compliance Errors
• Incorrect VAT rate application
• Claiming ineligible input VAT
• Missing tax invoices
• Manual bookkeeping errors
• Using non compliant accounting software
• Mixing personal and business expenses
• Ignoring Free Zone VAT nuances
• Late response to FTA notices
Penalties can range from AED 1,000 to AED 300,000+, depending on severity.
How to Stay Prepared for an FTA Audit in Dubai
1. Maintain Real Time Tax Compliance
Do not treat tax as a quarterly task.
• Reconcile VAT monthly
• Review returns before submission
• Track filing deadlines
2. Use FTA Compliant Accounting Systems
Accounting software should:
• Support VAT reporting
• Generate audit trails
• Allow easy data extraction
Manual Excel based accounting increases audit risk.
3. Conduct Internal VAT & Tax Reviews
Internal mock audits help identify gaps before the FTA does.
At Nines Consultancy, we:
• Review VAT treatment
• Verify input VAT eligibility
• Test invoice compliance
• Reconcile VAT vs financials
4. Train Your Finance & Admin Team
Staff should understand:
• VAT invoice requirements
• Input vs output VAT
• Record retention rules
• FTA communication protocols
Untrained staff often provide incorrect or incomplete responses during audits.
5. Respond to FTA Notices Professionally
Never ignore or delay FTA communications.
• Deadlines are strict
• Extensions are rarely granted
• Incorrect replies can escalate the audit
Professional handling can limit audit scope and penalties.
What Happens After an FTA Audit?
After the audit, the FTA may:
• Close the audit with no findings
• Request clarifications
• Issue an Assessment Notice
• Impose penalties
• Demand tax adjustments
Businesses have the right to:
• File reconsideration requests
• Appeal penalties (within strict timelines)
How Nines Consultancy Helps You Stay Audit Ready
We don’t wait for audits. We prepare you in advance.
Our FTA Audit Support Includes:
• VAT & Corporate Tax health checks
• Pre-audit compliance reviews
• FTA notice handling
• Audit representation
• Penalty mitigation support
• Record restructuring and clean-up
• Ongoing tax compliance monitoring
We work only with UAE laws and licensed authorities, ensuring transparency and protection.
Why Dubai Businesses Choose Nines Consultancy
• UAE-based compliance experts
• Deep understanding of FTA audit behavior
• Practical, not theoretical advice
• Fixed-fee, transparent pricing
• Client-first, penalty-prevention approach
Whether you are a startup, SME, Free Zone company, or Mainland business, we tailor compliance to your structure.
Frequently Asked Questions (FAQs)
1. Can the FTA audit past VAT periods?
Yes. FTA can audit up to 5 years, and longer in cases of suspected evasion.
2. Do Free Zone companies face FTA audits?
Absolutely. Free Zone status does not exempt businesses from VAT or audits.
3. What happens if documents are missing?
Missing records often result in estimated tax assessments and penalties.
4. Can penalties be reduced after an audit?
Yes, in some cases through reconsideration or voluntary disclosure.
5. How long does an FTA audit take?
From a few weeks to several months, depending on complexity.
Preparation Is Your Best Defense
FTA audits in Dubai are structured, data-driven, and increasingly detailed.
The cost of preparation is always lower than the cost of penalties.
If you want peace of mind, accurate compliance, and professional support, don’t wait for an audit notice.
Book Your Free FTA Compliance Consultation Today
Talk to a Tax Expert at Nines Consultancy
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