A tax audit is a fundamental power of the Federal Tax Authority to verify a taxpayer's compliance with the law. It begins with prior notification and then the issuance of a tax assessment. If an assessment is issued against you that you do not accept, the law grants you a tiered grievance ladder: you begin with a request to review the assessment before the Authority within forty business days, then a reconsideration request, then an objection before the Tax Disputes Resolution Committee, and finally an appeal before the competent court. Each stage has its own conditions and deadlines, and missing them forfeits the right. In this article we explain the steps of audit and objection as set out in Federal Decree-Law No. 28 of 2022 on Tax Procedures and its Executive Regulation.

How Is a Tax Audit Conducted and How Do You Object Before the Tax Disputes Resolution Committees in the UAE?

1- What Is a Tax Audit and When Does the Authority Resort to It?

Under the Tax Procedures Law, the Federal Tax Authority may conduct a tax audit on any person to verify the extent of their compliance with the provisions of the Decree-Law and the tax law. The audit may be carried out at the Authority's premises, at the audited person's place of business, or at any other place where they conduct business, store goods, or keep records.

As a rule, the Authority must notify the person of the tax audit at least ten business days before conducting it. By way of exception, tax auditors may enter without prior notice and temporarily close the place for a period not exceeding seventy-two hours in specific cases: where there are serious grounds to believe in tax evasion, where failure to close the place may obstruct the audit, or where a previously notified person has prevented the auditor from entering. In such cases, prior written approval from the Director-General is required, as well as permission from the Public Prosecution if the place is a residence.

2- Rights and Obligations of the Audited Person

The law balances the Authority's powers with the rights of the audited person. Every person subject to an audit, or their tax agent or legal representative, must provide all possible facilities and assistance to the tax auditor to enable them to perform their work. In return, the law grants the audited person clear rights:

The audit is conducted during the Authority's official working hours, but may exceptionally be conducted outside those hours by a decision of the Director-General in cases of necessity. The Authority may also re-audit a matter previously audited if new information emerges that may affect the audit outcome, subject to the rules of prescription.

3- Audit Outcomes: Tax Assessment and Penalty Assessment

The Authority must notify the audited person of the tax audit results. The audited person may review or obtain the documents and data on which the Authority relied in estimating the payable tax and administrative penalties.

The Authority issues a tax assessment to determine the value of the payable tax or the refundable tax, and notifies the taxpayer of it within ten business days of its issuance, in cases including: failure to apply for registration within the prescribed period, failure to submit the tax return, failure to pay the tax due under the return, submission of an incorrect tax return, or a shortfall in the tax due as a result of tax evasion. If the actual amount cannot be determined, the Authority may issue an estimated assessment that may be amended when new information emerges.

4- The Grievance Ladder: From the Authority to the Competent Court

The Tax Procedures Law arranges the means of challenging the Authority's decisions in progressive stages, none of which may be skipped, in the following order:

5- Stage One: Request to Review the Tax Assessment

Any person may submit a request to the Authority to review the tax assessment issued against them, or a part of it, and any related administrative penalties. The request must be reasoned and must be submitted within forty business days of the date on which the person was notified of the tax assessment and the related administrative penalties.

The Authority reviews the request and decides on it by a decision within forty business days of receipt, and notifies the applicant of the decision within five business days of its issuance. A request to review the assessment may not continue to be examined if a reconsideration request has been submitted regarding it.

6- Stage Two: Reconsideration Request Before the Authority

Any person may submit a request to the Authority to reconsider any decision, or part of it, issued by the Authority concerning them, provided the request is reasoned and submitted within forty business days of the date of notification of the decision. The Authority studies the request and decides on it by a reasoned decision within forty business days of receipt, and notifies the applicant within five business days of the issuance of the decision.

A reconsideration request concerning a tax assessment for which a review request was previously submitted may not be filed except after the Authority issues its decision on the review request or after the period prescribed for issuing the decision has lapsed.

7- Stage Three: Objection Before the Tax Disputes Resolution Committee

Under the law, one or more permanent committees called the "Tax Disputes Resolution Committee" are formed, chaired by a member of the judicial authority and comprising two experts registered in the roster of tax experts, appointed by a decision of the Minister of Justice in coordination with the Minister of Finance. The committee is competent to decide on objections filed against the Authority's decisions concerning reconsideration requests, and to decide on reconsideration requests that were submitted to the Authority but on which no decision was taken.

The committee studies the objection and decides on it within twenty business days of receipt, and notifies the objector and the Authority of its decision within five business days of its issuance. The committee's decision is final regarding the objection if the total payable tax and administrative penalties determined under it do not exceed AED 100,000. In all cases, tax dispute lawsuits are not accepted before the competent court if the objection was not first filed before the committee.

8- Enforcement of Committee Decisions and Appeal Before the Court

Final decisions issued by the committee in disputes not exceeding AED 100,000 in value are deemed enforceable instruments. Decisions issued in disputes exceeding AED 100,000 in value are deemed enforceable instruments if they are not appealed before the competent court within forty business days of the date of notification of the objection result. Final committee decisions are enforced by the execution judge at the competent court.

The Authority and the person — as the case may be — may appeal the committee's decision before the competent court within forty business days of the date of notification of the committee's decision, whether by objecting to the decision in whole or in part, or where the committee fails to issue a decision on an objection submitted to it.

Frequently Asked Questions

Legal References