Is Your Business Ready for an FTA Review? The Importance of a Tax Compliance Health Check

 


Submitting VAT and Corporate Tax returns on time is important, but timely filing alone does not guarantee full tax compliance.

Businesses must also ensure that the figures reported to the Federal Tax Authority are supported by accurate accounting records, valid tax documents and clear transaction evidence. Any differences between tax returns, financial statements and bank activity may lead to questions during an FTA review or tax audit.

A periodic tax compliance health check can help identify and correct these gaps before they become costly problems.

What Is a Tax Compliance Health Check?

A tax compliance health check is a detailed review of a company’s tax registrations, accounting records, filed returns and supporting documents.

The objective is to confirm that the business has correctly calculated and reported its tax obligations and can provide sufficient evidence for the information submitted.

It should cover all relevant areas, including VAT, Corporate Tax and the company’s general record-keeping practices.

Key Areas That Should Be Reviewed

1. Tax Registration Details

The information registered with the FTA should match the company’s current legal documents.

Businesses should review their:

  • Legal name and trade licence details

  • Registered business address

  • Shareholder and ownership information

  • Business activities

  • Contact details

  • Corporate Tax period

  • VAT registration status

Any changes to the company’s ownership, licence, address or activities should be assessed to determine whether an update is required.

2. VAT Return Reconciliation

The sales and purchases reported in VAT returns should reconcile with the accounting records.

A health check should confirm that:

  • All taxable sales have been reported

  • Zero-rated and exempt transactions are correctly classified

  • Input VAT is supported by valid tax invoices

  • Credit notes and refunds are properly recorded

  • Imports are reconciled with the relevant customs records

  • VAT return balances agree with the general ledger

  • VAT payments have been made within the applicable deadlines

Small differences can accumulate over several tax periods and become more difficult to explain later.

3. Corporate Tax Review

Corporate Tax compliance requires more than calculating tax on the accounting profit.

Businesses should review whether:

  • Revenue and expenses are fully recorded

  • Personal and business expenses are properly separated

  • Non-deductible expenses have been identified

  • Related-party transactions are appropriately documented

  • Fixed assets and depreciation are correctly recorded

  • Loans and shareholder transactions are properly classified

  • Tax elections and available reliefs have been assessed

  • The filed return agrees with the final financial records

The company should also retain clear working papers showing how the taxable income was calculated.

4. Supporting Documents

Every figure reported in a tax return should have a supporting document or reliable accounting record.

Important documents may include:

  • Sales and purchase invoices

  • Bank statements

  • Contracts and agreements

  • Payment receipts

  • Customs documents

  • Payroll records

  • Expense claims

  • Credit notes

  • Loan agreements

  • Fixed-asset schedules

  • Related-party documentation

Missing or incomplete supporting documents can create significant compliance exposure, even where the underlying transaction is genuine.

5. Bank and Accounting Reconciliation

Bank statements should be regularly reconciled with the accounting system.

Unexplained deposits, transfers between related parties, cash withdrawals and shareholder payments should be investigated and correctly classified.

A business should be able to explain the commercial purpose of each material transaction and show how it has been reflected in its accounts and tax returns.

Common Warning Signs

A business may need an immediate compliance review if:

  • Tax returns are prepared directly from bank statements

  • Accounting records are completed only at year-end

  • Personal expenses are paid from the company account

  • Sales invoices are missing or issued incorrectly

  • VAT returns do not agree with the accounting ledger

  • Shareholder loans have no supporting agreements

  • Company information has changed but the tax records have not been updated

  • Supporting documents are stored across different systems or devices

  • Previous tax filings were prepared without proper reconciliations

These issues do not always mean that tax has been underpaid, but they can make it difficult for the company to demonstrate compliance.

Correcting Errors Before They Escalate

If a health check identifies an error, the company should assess its nature, value and impact on previous tax filings.

Depending on the circumstances, corrective action may include:

  • Updating the accounting records

  • Obtaining missing documents

  • Correcting the tax treatment of transactions

  • Updating FTA registration details

  • Revising internal procedures

  • Submitting the appropriate correction or disclosure

  • Seeking professional tax advice

Early action can reduce operational disruption and place the company in a stronger position if the FTA requests information.

Tax Compliance Should Be an Ongoing Process

Tax compliance should not begin a few days before a filing deadline. It should be integrated into the company’s monthly accounting and financial controls.

Regular reconciliations, document reviews and internal checks make tax return preparation faster, more accurate and easier to defend.

How Devenir Corporate Services Can Help

Devenir Corporate Services provides comprehensive tax compliance support to businesses in the UAE, including:

  • VAT and Corporate Tax registration

  • VAT return preparation and filing

  • Corporate Tax return preparation and filing

  • Tax compliance health checks

  • Accounting and tax reconciliations

  • Review of supporting documentation

  • Assistance with FTA queries and notifications

  • Correction of historical accounting records

  • Ongoing tax and bookkeeping support

Do not wait for an FTA query to discover gaps in your records. A proactive tax compliance health check can protect your business, strengthen internal controls and reduce future compliance risks.

Contact Devenir Corporate Services to review your company’s tax position and ensure that your records are ready for regulatory review.

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