Value Added Tax (VAT) compliance and audits are crucial aspects of running a business in…
What information Federal Tax Authority (FTA) may ask from a taxpayer by issuing a Notice under Article 18?
As per Article 18 and 19 of Cabinet Decision No. 36 of 2017 on the Executive Regulation of Federal Law No. 7 of 2017 on Tax Procedures, the Federal Tax Authority (FTA) may ask for information or documents from the taxpayer and the taxpayer shall provide all the information or documents as required in the FTA notification.
Let us have a look on the Article 18 & 19 as specified in the law:
Article 18 – Notice to Provide Information or Documents
The Authority may issue a Notification requiring a Person to provide any information or any Documents in relation to himself or another Person if these Documents or information are considered necessary by the Authority.
Article 19 – Complying with Notifications
1. Where a person has been notified to provide information or Documents, the Person shall do so within the period specified and by the means and in the form determined in the Notification.
2. Where a Notification requires a Person to provide information or Documents, these shall be submitted at any of the following places:
a. A place agreed upon between the Person and the Authority.
b. The place determined by the Authority provided that this place is appropriate and not used solely as a dwelling.
As Article 18 states that FTA may ask for any information or any documents as considered necessary by the Authority, now the question is what information or documents Federal Tax Authority (FTA) may ask from a taxpayer by issuing a Notice under Article 18?
So far as per my personal experience, FTA may ask following information’s and documents, but it’s not a comprehensive list, case to case basis it may vary :
- What accounting systems are used?
- Description of goods and services supplied.
- Where are the Taxable Person’s customers located (e.g. UAE / other GCC countries / outside the GCC)?
- How many employees does the Taxable Person have?
- How many different premises does the Taxable Person have?
- What type of premises does the Taxable Person have (e.g. office, warehouse, manufacturing, retail, etc.)?
- Are any goods or services supplied free of charge?
- Details of imports and exports with the types of goods and services.
- Does a taxable person issue vouchers? If so, provide a description of the nature of the vouchers
- Is there any supply through an agent or taxable person is an agent?
- Does a taxable person provide entertainment to anyone? If so, the taxable person needs to provide an overview of their input tax recovery policy in relation to related expenses.
- Do taxable person gives gifts to anyone? If so, he needs to provide an overview of the nature of these gifts and the VAT treatment applied.
- Details of establishment outside UAE.
- Does a taxable person sell any goods under the profit margin scheme?
- Does a taxable person supply any goods that are subject to a domestic reverse charge in the UAE?
- Does a taxable person have any assets designated for long-term use?
- Does a taxable person had spent more than AED 5,000,000 on any single item? if so, details of the same.
- List of any adjustments (if any) that has been made for bad debts.
- How are deposits and any other advance payments received treated?
- An outline of input tax recovery policy in relation to the expenses related to vehicles.
- An outline of your input tax recovery policy in relation to the expenses related to phones.
- Details of exempt income (if any) and method of input tax apportion throughout the year.
- Details of transactions submitted in VAT returns in the template specified by the FTA.
- The full detailed Trial Balance with opening and closing balances.
- Reconciliation between the Trial Balance and the VAT returns.
- A list of the categories of income received since registration and the VAT treatment applied.
- Corporate Group Structure including all branches and locations.
- Financial statements (audited if available) for the notice period.
So, it is advisable for all taxpayers to keep and maintain proper accounting and bookkeeping as required under UAE VAT law to avoid penalties and related consequences.
Reference: The Executive Regulation of Federal Law No. 7 of 2017 on Tax Procedures
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