What happens during an FTA tax audit?

Article 16 – The Right of the Authority to Perform a Tax Audit 1. The Authority may perform a Tax Audit on any Person to verify the extent of that Person’s compliance with the provisions of this Decree-Law and the Tax Law. 2. The Authority shall notify the Person of a Tax Audit at least (10) ten Business Days prior to conducting the Tax Audit. 3. The Authority may perform the Tax Audit at its premises or the place of Business of the Person subject to the Tax Audit or any other place where such Person conducts Business, stores goods or keeps records. 4. By way of exception to Clause 2 of this Article, the Tax Auditor may enter, without prior Notification, any place where the Person subject to the Tax Audit conducts his Business, stores goods or keeps records, and may temporarily close such place in order to perform the Tax Audit for a period not exceeding )72) seventy-two hours in any of the following cases: a. If the Authority has serious grounds to believe that the Person subject to the Tax Audit is participating or involved in Tax Evasion in respect of any of his or any other Person’s obligations imposed under this Decree-Law or the Tax Law; b. If the Authority has serious grounds to believe that not temporarily closing the place where the Tax Audit is conducted will hinder the conduct of the Tax Audit; c. If the Person who has been given advance notice of the Tax Audit under Clause 2 of this Article attempts to stop the Tax Auditor from entering the place where the Tax Audit is to be performed. 5. In all cases stipulated in Clause 4 of this Article, the Tax Auditor must obtain the prior written consent of the Director General or person acting on his behalf, and if the place to be accessed is a place of residence then a permit from the Public Prosecution must also be obtained. 6. Places closed under this Article shall be reopened upon the expiration of (72) seventy-two hours, unless the Authority obtains a permit from the Public Prosecution to extend the closure period for a similar period prior to the expiry of the period mentioned in this Article. 7. The Executive Regulation shall determine the necessary procedures related to the Tax Audit. Federal Decree-Law No. 28 of 2022 and its amendments – As published by the Ministry of Finance 11

Article 21 – The Rights of Persons subject to Tax Audit A Person subject to Tax Audit has the right to: 1. Request the Tax Auditor to show his job identification card; 2. Obtain a copy of the Notification of the Tax Audit; 3. Attend the Tax Audit which takes place outside the Authority; Federal Decree-Law No. 28 of 2022 and its amendments – As published by the Ministry of Finance 12 4. Obtain copies of any original paper or digital documents seized or obtained by the Authority during the Tax Audit, in accordance with the Executive Regulation.

Article 15 – Conducting Tax Audit 1. Prior to deciding to conduct a Tax Audit, the Authority shall consider the following: a. That the Tax Audit is necessary for protecting the integrity of the Tax system. b. The responsibility of the Person, or any Person associated with it, to comply with the Decree-Law and Tax Law. c. Tax revenue expected to be collected. d. The compliance and administrative burdens on both the Person and the Cabinet Decision No. 74 of 2023 and its amendments – As published by Ministry of Finance 13 Authority, related to performing the Tax Audit. 2. The Authority may decide to audit a Person previously audited and shall take the following into consideration: a. The results of the previous Tax Audit. b. Any new information or data which may change the position of the Authority. 3. The Authority’s decision to conduct a Tax Audit is at its sole discretion, and may not be objected or challenged by any Person.

ُ .نهايةُالفترةُالضريبيةُذاتُالصلة expiration of 5 years from the end of the relevant tax period. As an example, the tax period from July 2022 to ُ2022ُُبالنسبةُللفترةُالضريبيةُمنُيوليو،علىُسبيلُالمثال September 2022, with the related tax return to be ُُالتيُيتمُتقديمُاإلقرارُالضريبيُالمتعلق،2022ُإلىُسبتمبر filed no later than 28 October 2022, generally ُُالُيمكنُعمومً ا،2022ُُأكتوبر28ُبهاُفيُموعدُالُيجاوز cannot be subject to a tax audit or the issuance of ُلتلكُالفترةُالضريبيةُأنُتخضعُللتدقيقُالضريبيُأوُأنُيتم a tax assessment after 30 September 2027. ُ .2027ُُسبتمبر30ُإصدارُتقييمُالضريبيُبشأنهاُبعد As an exception to the general rule, the FTA may ُ ُيجوز ُللهيئة ُإجراء ُتدقيق،واستثنا ًءُ ُمن ُالقاعدة ُالعامة conduct a tax audit or issue a tax assessment to the ُضريبي ُأو ُإصدار ُتقييم ُضريبي ُللخاضع ُللضريبة ُبعد taxable person after 5 years from the end of the ُ) ُخمس ُسنوات ُمن ُنهاية ُالفترة ُالضريبية ُذات5(ُ مرور ُ :الصلةُوذلكُفيُالحاالتُاآلتية relevant tax period in the following instances: − If the FTA notified the taxable person of the tax ُإذا ُقامت ُالهيئة ُبتبليغ ُالخاضع ُللضريبة ُبالتدقيق − audit before the expiry of the 5-year period, ُُعلىُأن،)ُالخمسُسنوات5(ُالضريبيُقبلُانقضاءُمدة provided that the tax audit is completed or the ُ،يتمُإتمامُالتدقيقُالضريبيُأوُإصدارُالتقييمُالضريبي tax assessment is issued, within 4 years from ُ) ُأربع ُسنوات ُمن ُتاريخ ُالتبليغ ُبالتدقيق4(ُ خالل the date of the notification of the tax audit. ُ ُ.الضريبي ُ :ًُفمثال For example: If the FTA notified the taxable person on 23 ُ ُديسمبر23ُ إذاُأبلغت ُالهيئةُالخاضعُللضريبةُبتاريخ December 2022 that it will audit the tax periods ُُبأنهاُستقومُبالتدقيقُعلىُالفتراتُالضريبيةُلعام2022 of 2018, this tax audit must be completed, or ُُفيجبُإكمالُهذاُالتدقيقُالضريبيُأوُإصدار،2018 the relevant tax assessment must be issued, ُ .2026ُُديسمبر23ُُقبل،التقييمُالضريبيُذوُالصلة before 23 December 2026. − If the person submitted a voluntary disclosure ُإذا ُقام ُالشخص ُبتقديم ُتصريح ُطوعي ُفي ُالسنة in the fifth year from the end of a tax period, ُ ُعلى ُأن ُيتم ُإتمام،الخامسة ُمن ُنهاية ُفترة ُضريبية provided that the tax audit is completed or the ُُخاللُسنة،التدقيقُالضريبيُأوُإصدارُالتقييمُالضريبي tax assessment is issued, within one year from the date of submission of the voluntary disclosure. 10/17 ُ .واحدةُمنُتاريخُتقديمُالتصريحُالطوعي −

15. FTA compliance checks 15.1. Chapter summary The FTA has the right to establish or verify a person’s VAT liability by way of a tax audit. Under the tax audit process, the FTA is entitled to examine the records required to be preserved by a taxable person under the law and to generally inspect the circumstances of their business. A tax audit may be carried out at the taxable person’s business premises (i.e. a “field tax audit”) or in the offices of the FTA. Generally, prior notification of a tax audit will be given. In the process of carrying out a tax audit, the FTA may make copies of, take extracts from, or samples of any information or goods as it may deem necessary. 15.2. Why is a tax audit necessary? VAT is a self-assessment tax, meaning that taxable persons themselves declare the amount of tax payable to or recoverable from the FTA on their tax returns. The tax audit provides the FTA with a mechanism for checking whether such a declaration is correct. If as a result of the audit an underpayment of VAT is discovered, the FTA can issue an assessment to require payment of the relevant VAT, together with issuing penalties. 15.2.1. How often will a business be audited? Not all taxable persons will be audited with the same frequency. The FTA will determine which persons should be audited and with what regularity – based on the risk to the public revenue. Examples of factors that are likely to be taken into consideration include:   how large or complex the business is; and past compliance history (for example, whether any returns have been submitted late, or have been incorrect). For example, a large business selling a large volume of goods, and having a poor compliance record, is more likely to be subject to a tax audit than a small business with a strong compliance record, as the risk to the public revenue is greater. 15.2.2. Where and when will the audit take place? The FTA will normally perform the tax audit at its own offices or the place of business of the person subject to the tax audit. This can include any place where the person conducts business or keeps records. Where the audit takes place at the person’s place of business, it will usually be during the FTA’s normal business hours. Where necessary, the tax audit may be exceptionally conducted outside of these times. 54 VAT Guide | Taxable Person | VATG001