Discover how a VAT Pre-Audit Check can help you avoid penaltiesand face the FTA audit with confidence.

1. FTA Audit: More Than Just Filing
2. Pre-Audit Check = Business Shield
3. Hidden VAT Traps to Fix Early
4. Internal Controls & Mock Audit Simulations
5. Disclose Before You’re Discovered
6. Stratify = Your Audit Readiness Partner

With the mandatory VAT audit wave anticipated in 2025, UAE businesses are entering a critical compliance phase. The Federal Tax Authority (FTA) has intensified its oversight, using advanced data-matching tools, analytics, and structured audit programs to identify gaps in tax reporting. In this landscape, the misconception that simply filing VAT returns satisfies compliance obligations is risky and outdated. Instead, businesses must recognize that filing is only the beginning—what follows is ensuring that every number filed is verifiable, consistent, and compliant.

A VAT pre-audit check is no longer a “good-to-have.” It is now a strategic necessity for businesses seeking to avoid unnecessary penalties, reputational risks, and operational disruptions due to tax assessments. This blog outlines what businesses should do to prepare, and how pre-audit reviews coupled with voluntary disclosures can help correct legacy mistakes before the FTA steps in.

Understanding the Purpose of an FTA VAT Audit

An FTA VAT audit is a formal review process conducted to ensure that a taxable person has complied with the VAT laws of the UAE. It covers everything from the accuracy of VAT returns and supporting documentation to transaction-level review, treatment of complex supplies, and internal controls. The audit may be triggered by refund claims, mismatches in third-party data, suspicious trends, or random selection based on the FTA’s risk parameters.

Failure to comply during an audit can lead to hefty penalties, rejection of VAT refunds, and in some cases, criminal implications if the error is considered willful or fraudulent. The only way to reduce this risk is to ensure that your compliance position is already strong—before the audit begins.

The Role of a VAT Pre-Audit Check

A VAT pre-audit check is a structured internal review that examines:

• The consistency of VAT returns with the company’s financials

• The accuracy of taxable supply classifications (standard-rated, zero-rated, exempt)

• Reconciliation of import records with FTA and customs data

• Application of the Reverse Charge Mechanism (RCM) for imports and services

• Documentation standards for invoices, credit notes, and customs entries

This process identifies errors, gaps, and potential non-compliance issues before the FTA does. It enables businesses to correct these issues through voluntary disclosure, minimizing penalties and demonstrating a proactive compliance mindset.

Areas to Review Before an FTA Audit

1. Internal Controls and Documentation

A robust internal control system is the foundation of tax compliance. Businesses should review workflows across departments to ensure tax decisions are consistently applied, tracked, and supported by the necessary documentation. Missing or invalid tax invoices, unsupported adjustments, or incomplete reconciliations are frequent red flags.

2. Simulation Through Mock Audits

One of the best ways to prepare is to conduct a mock audit. This simulates the FTA’s approach and tests your readiness. It helps identify weak spots in recordkeeping, tax positions, system outputs, and employee awareness—so you can correct them before they escalate into liabilities.

3. Staff Training and Cross-Functional Alignment

VAT compliance is not just a finance responsibility—it involves procurement, logistics, sales, HR, and even IT. Training sessions across functions ensure your team understands their role in ensuring that data captured is compliant with VAT laws.

Deep Dive: Key VAT Risk Zones to Check

Review of VAT Returns

•  Ensure standard-rated supplies are correctly taxed at 5% and supported by compliant tax invoices.
• Validate zero-rated supplies (e.g., exports) are eligible and backed by customs exit certificates, shipping documents, and export contracts.
• Cross-verify all imported services and goods are recorded under RCM with input credits claimed only when eligible.

Handling Exempt and Mixed Supplies

• Accurately report exempt supplies and apply input VAT apportionment formulas correctly for mixed-use transactions.
• Many errors stem from incorrect ratios and unjustified full input VAT claims when partial exemption rules apply.

Import Reconciliation

• Reconcile Customs Bill of Entries and VAT imports with your accounting records.
• Ensure your import declarations and RCM adjustments align with the books—mismatches here often trigger FTA queries.

Input Credit and Recordkeeping

• Claim only eligible input VAT—expenses for entertainment, blocked categories, or personal use should be excluded.
• Maintain full documentation, including supplier invoices, contract agreements, credit notes, and payment proofs.

Voluntary Disclosure: A Legal Window to Correct Errors

Once issues are identified, businesses can file a Voluntary Disclosure with the FTA to correct previous errors in VAT returns. This route offers a significantly reduced penalty structure compared to waiting for the FTA to discover the discrepancy during an audit. The FTA rewards honesty and transparency and penalizes concealment or negligence.

Common areas requiring voluntary disclosure include:

• Incorrect VAT treatment on inter-company or international supplies

• Over-claimed input tax

• Unreported RCM liabilities

• Wrong classification of supplies (standard vs. zero-rated)

• Incorrect revenue declarations

How Stratify Consulting Group Supports Audit Readiness

Stratify Consulting Group, an FTA-Approved Tax Agency, specializes in conducting pre-audit VAT reviews, health checks, and voluntary disclosures. Our approach involves a full audit of your past VAT filings, reconciliations, and process flows to identify risk areas before they reach the FTA.

We help you:

• File voluntary disclosures with proper justifications and supporting documentation

• Train internal teams to improve future compliance

• Implement compliance systems and ERP checks

• Engage in professional communication with FTA auditors when needed

With Stratify, you get more than advice—you get a defense-ready VAT framework.

Act Now, Stay Ahead

If your business:

• Filed for VAT refunds in the past year

• Deals with exempt or mixed supplies

• Has changed consultants or ERP systems

• Imports goods or services regularly

• Has never conducted a VAT health check

Then now is the time to act. Don’t wait for an FTA audit notice to find out something is wrong. Discover it yourself. Correct it confidently. Move forward stronger.

Request a Free VAT Pre-Audit Consultation Today Email: info@stratify.ae