What Is an FTA Tax Audit?

The Federal Tax Authority (FTA) has broad powers under Federal Law No. 7 of 2017 (Tax Procedures Law) to audit any taxable person's records and premises. An audit is an official examination of your tax returns, underlying financial records, and business activities to verify that you have correctly calculated and paid your taxes.

Audits can cover VAT, Corporate Tax, Excise Tax, or any combination. The FTA may audit a business for a specific tax period or for multiple years simultaneously.

What Triggers an FTA Audit?

The FTA does not publish a formal risk-scoring model, but audits are commonly triggered by:

  • Consistent VAT refund claims — particularly where input tax exceeds output tax repeatedly
  • High-value or unusual transactions flagged by the FTA's analytics systems
  • Discrepancies between VAT returns and corporate tax filings (revenue figures that don't reconcile)
  • Late or amended filings — a pattern of corrections draws scrutiny
  • Industries with high cash volumes — hospitality, retail, real estate, construction
  • Related-party transactions that appear inconsistent with arm's length pricing
  • Third-party information — reports from customs, banks, or other government agencies
  • Random selection — the FTA audits a proportion of businesses routinely regardless of risk

New in 2026: With corporate tax now in effect, the FTA is conducting concurrent VAT and corporate tax audits. A VAT audit may now pull in your corporate tax records, and vice versa. Businesses that have not aligned their VAT and CT filings are at significant risk.

The FTA Audit Process — Step by Step

Step 1: Audit Notice

The FTA must give you at least 5 business days' written notice before an audit begins (unless they have reason to believe evidence may be destroyed, in which case they may arrive unannounced). The notice will specify the taxes and periods under review.

Step 2: Document Request

Auditors will issue a list of documents required. Typical requests include:

  • VAT returns and supporting workings for all periods under review
  • Sales invoices, purchase invoices, credit notes, and debit notes
  • Bank statements reconciled to the VAT returns
  • General ledger and trial balance
  • Import and export documentation
  • Contracts with customers and suppliers
  • Corporate tax return and supporting schedules
  • Transfer pricing documentation if applicable

Step 3: Audit Fieldwork

Auditors review documents, interview staff, and may visit your premises. They will cross-reference your records against FTA systems (EmaraTax data, customs records, UAE banking reporting). This phase typically lasts 2–8 weeks depending on the business size and complexity.

Step 4: Preliminary Findings

The FTA will share draft findings and give you an opportunity to respond. This is your most important window — errors or misunderstandings can often be corrected at this stage before they become formal assessments.

Step 5: Final Assessment

If the FTA determines that tax was underpaid, they will issue a Tax Assessment with the amount owed plus penalties. You have 20 business days to pay or to file a reconsideration request.

Common Audit Findings — What the FTA Looks For

VAT

  • Input tax claimed on non-business or blocked expenses (entertainment, motor vehicles)
  • Output tax understated — revenue not captured in VAT returns
  • Zero-rating applied incorrectly (exports not supported by proof of export)
  • Exempt supplies mixed with standard-rated supplies with no apportionment
  • Missing or non-compliant tax invoices

Corporate Tax

  • Non-deductible expenses claimed (entertainment, fines, provisions)
  • Related-party transactions not at arm's length
  • Free zone qualifying income vs non-qualifying income incorrectly classified
  • Small Business Relief claimed when revenue thresholds were exceeded
  • Depreciation or amortisation calculated incorrectly

Your Rights During an FTA Audit

  • You have the right to be represented by a tax agent or legal counsel throughout the audit
  • You can request an extension of time to produce documents — the FTA generally grants reasonable requests
  • You can object to the audit findings through a formal Reconsideration Request to the FTA
  • If unsatisfied with the reconsideration outcome, you can appeal to the Tax Disputes Resolution Committee (TDRC)
  • Final appeals go to the Courts

How to Prepare Before an Audit Arrives

  • ✓ Reconcile your VAT returns to your financial statements every quarter — don't wait for year-end
  • ✓ Maintain a complete, organised digital file of all tax invoices (Emirates post-VAT requirement: compliant invoices with TRN, date, description, VAT amount)
  • ✓ Retain all records for a minimum of 5 years from the end of the relevant tax period (and 7 years for real estate transactions)
  • ✓ Conduct an internal VAT and CT health check annually — identify and voluntarily correct errors before the FTA does
  • ✓ Ensure your accounting software produces an audit trail — every journal entry should be traceable
  • ✓ Brief your finance team on what to say (and not say) to auditors — never provide unsolicited information

Voluntary Disclosure: If you discover an error before the FTA contacts you, filing a Voluntary Disclosure significantly reduces penalties. The penalty for a self-corrected error can be as low as 5% of the underpaid tax, versus 50% or more if found during an audit.