Tax Audit in the UAE: I Received an Audit Notice, What Should I Do?

If you have received a tax audit notice from the Federal Tax Authority, the direct answer is this: a tax audit in the UAE is neither an accusation nor a penalty; it is an examination of records governed by the Tax Procedures Law with fixed deadlines and rights. You must be notified at least ten business days before the audit; you may attend it and obtain copies of every document seized; and if it ends in a tax assessment or penalties, you have forty business days to apply for a review of the assessment or reconsideration, then an objection before the Tax Disputes Resolution Committee, then the court. The biggest mistake is dealing with the tax auditor without a lawyer from day one.

In this guide, a tax lawyer in Dubai from AWADH ALMHEIRI LAW FIRM AND LEGAL CONSULTATIONS explains in practical terms why a tax audit is opened in the UAE, your rights during the audit, how the tax assessment and the penalty assessment are issued, the step-by-step route for objecting to the audit result, when the Authority's power to audit lapses by limitation, and when a voluntary disclosure before the audit is cheaper for your company.

Tax audit in the UAE: I received an audit notice, what do I do?

The first thing to understand is that the Authority has the right to audit any person to verify compliance with the Tax Procedures Law and the tax laws, whether for VAT, corporate tax or excise tax. But that right is bound by procedure: prior notice, official working hours, rights for the audited person, and limitation periods. Whoever knows these limits turns the audit from a threat into a controlled process.

• A large VAT refund claim or a recurring credit balance.

• Repeated late returns or successive voluntary disclosures.

• Mismatches between return revenue and customs, bank or supplier data.

• The sector: real estate, gold, e-commerce and free zones are under closer scrutiny.

• A complaint or report from a competitor, customer or former employee.

Your rights during a tax audit in the UAE

Under the Federal Decree-Law on Tax Procedures, the audited person has rights that cannot be waived, and many companies lose the audit simply because they do not know them:

Steps for handling a tax audit from notice to objection

Tax assessment and penalty assessment: what may the Authority impose?

The Authority issues a tax assessment to determine the tax due in defined cases, including failure to register on time, failure to file the return, failure to pay, filing an incorrect return, and a shortfall in tax resulting from evasion. Where the actual amount or the accuracy of the return cannot be determined, the Authority may issue an estimated assessment, the most dangerous outcome for a business owner, because an estimate is built on indicators rather than books. The Authority amends the estimated assessment if new information emerges and notifies you within ten business days.

Administrative penalties are assessed separately for violations such as failing to keep records, failing to provide data in Arabic on request, late registration or deregistration, and failing to notify the Authority of changes to the tax record. We explained in an earlier post on tax penalties in the UAE and how to object to them and request their reduction the mechanism for challenging and waiving these penalties.

Limitation: when does the Authority's power to audit lapse?

The rule is that the Authority may not conduct a tax audit or issue a tax assessment after five years from the end of the tax period. The exceptions matter: if you were notified of the start of the audit before the five years expired, the Authority may complete it within four years of the notification; if you filed a voluntary disclosure in the fifth year, an audit may follow within one year of filing; and in cases of tax evasion or non-registration the period rises to fifteen years. No voluntary disclosure may be filed after five years from the end of the tax period.

Voluntary disclosure before the audit: when is it cheaper for your company?

If you discover an error in a previous return before being notified of an audit, a voluntary disclosure reduces the percentage-based penalty on the tax difference to its minimum, whereas an error discovered by the auditor attracts the highest rate. The practical rule: review your VAT and corporate tax returns for the last five years now and correct what you find before the notice arrives, after first checking your position on exemptions in our post on who is exempt from corporate tax in the UAE.

Beware of the audit's effect on the bank: a tax evasion report may lead to the freezing of the company's bank accounts, which makes engaging a lawyer essential to manage the criminal and tax files together.

The legal deadlines you must remember

Practical tips from a tax lawyer in Dubai when an audit is opened

Legal references

• Federal Decree-Law No. 28 of 2022 on Tax Procedures.

• Cabinet Decision No. 74 of 2023 on the Executive Regulation of the Tax Procedures Law.

• Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, as amended.

• Federal Decree-Law No. 8 of 2017 on Value Added Tax, as amended.

• Cabinet Decision No. 75 of 2023 on administrative penalties for violations related to the application of the Corporate Tax Law.

• Cabinet Decision No. 40 of 2017 on administrative penalties for tax violations, as amended.

Frequently asked questions about tax audits in the UAE