Detect Anomalies Early, Strengthen VAT Governance, and Safeguard Against Financial and Reputational Risks Through Proactive Compliance Reviews.
1. Why VAT Pre-Audit Reviews Are Critical in Today’s UAE Environment
In the UAE, VAT compliance has evolved beyond timely return filing into a continuous governance process. The Federal Tax Authority (FTA) now uses sophisticated data analytics, cross-system matching, and risk-based audit triggers to identify irregularities.
Even minor errors—misclassified sales, missed reverse charge entries, or ineligible input VAT claims—can result in penalties up to 200%. FTA’s audit approach includes:
- Matching supplier and customer VAT filings.
- Reconciling customs declarations (Mirsal2, ICP) with VAT returns.
- Reviewing bank transactions, contracts, and ERP data.
2. What is a VAT Pre-Audit Health Check?
A forensic vat compliance review aligned with the UAE VAT Law and Executive Regulations. It is designed to:
- Reconcile VAT returns with accounting and customs data.
- Verify transaction treatment across sales, purchases, imports, and adjustments.
- Test ERP tax configurations and internal controls.
- Identify opportunities for voluntary disclosures to reduce penalty exposure.
This is not a simple checklist—it is a deep dive into financial records, operational processes, and VAT governance frameworks.
3. Common Pitfalls That Trigger FTA Attention
Through our reviews, we repeatedly identify issues such as:
- Recovering blocked input VAT on staff benefits, motor vehicles, and entertainment.
- Inconsistent reverse charge application for imports of goods or services.
- Zero-rating services without meeting Article 31/33 conditions.
- Discrepancies between customs import data and VAT returns.
- Missing or non-compliant tax invoices.
- Incorrect Emirates-wise revenue reporting.
Most errors are unintentional—caused by system limitations, staff changes, or law misinterpretation.
4. The Strategic Role of Voluntary Disclosures
Article 10 of the Tax Procedures Law allows taxpayers to correct past errors proactively. The benefits includes-
- Lower penalties (5%–30% of underpaid VAT).
- Reduced risk of legal escalation or fraud classification.
- Opportunity to strengthen controls before the next filing cycle
However, voluntary disclosure is not allowed once an audit notice is issued, so timing is critical.
5. Comprehensive Compliance Coverage – 80+ Checkpoints
Our VAT Pre-Audit Health Check covers 80+ checkpoints across 12 areas, ensuring no compliance gap is overlooked:
- Sales & Output VAT: Verification of rates, zero-rating, bad debt relief, place of supply, and mixed supply classification.
- Purchases & Input VAT: Blocked expense identification, capital goods scheme checks, reverse charge validation, apportionment.
- Imports & Customs: Mirsal2 reconciliation, Box 6 accuracy, freight & insurance adjustments.
- Employee Transactions: Deemed supply checks, recovery from employees, VAT on benefits.
- Intercompany & Related Parties: VAT–TP alignment, documentation reviews.
- Records & Reconciliations: Ledger-to-return matching, fixed asset VAT blocks.
- Filing & Payments: Box accuracy, VD process readiness, penalty monitoring.
- Structuring & Advisory: VAT grouping, PE risks, TOGC analysis.
- Risk & Controls: Segregation of duties, VAT portal access control.
- Industry-Specific Risks: Drop shipments, consignment stock, warranty services.
- Documentation Archive: Retention compliance, PO/GRN matching.
- Penalty & Dispute Management: Audit readiness, appeal tracking, reconsideration support.
This comprehensive approach ensures you are audit-ready year-round.
6. Building a Strong VAT Governance Framework
A robust VAT governance model should include:
- Quarterly internal VAT reviews
- ERP VAT coding governance with restricted access.
- Centralised document repository for all VAT records.
- Ongoing staff training on legal updates and FTA clarifications.
- Segregated approval workflows for VAT return preparation and filing.
These measures reduce reliance on reactive corrections and keep compliance continuous.
7. How Stratify Consulting Group Supports You
As an FTA-Approved Tax Agency, Stratify provides:
- Full-scope VAT Health Checks with 80+ checkpoints.
- Preparation and filing of voluntary disclosures.
- Audit-ready documentation packs.
- VAT SOP and control framework design.
With sector experience in real estate, logistics, manufacturing, and services, our team ensures your compliance is proactive, strategic, and defensible.
Don’t Wait for the FTA to Call
If you’ve filed VAT refunds, undergone system migrations, made large capital purchases, or operate in high-risk sectors, now is the right time for a VAT Pre-Audit Health Check. The cost of prevention is always lower than the cost of penalties.
