As the UAE’s Corporate Tax regime matures, the Federal Tax Authority (FTA) has begun planning targeted Corporate Tax audits.
Being unprepared can result in heavy fines, reputational risk, and potential business disruption.
This guide walks you through how to prepare for a UAE Corporate Tax audit in 2025 — step by step
Why the FTA Conducts Corporate Tax Audits
- Verify the accuracy of filed CT returns
- Check the deductibility of expenses
- Review related-party transactions and transfer pricing
- Confirm IFRS compliance
- Detect under-reported income
Step 1 – Maintain Complete Documentation
Keep ready for inspection:
- Audited IFRS financial statements
- Trial balance and general ledger
- Invoices and receipts (sales and purchases)
- Payroll records and bank statements
- Contracts with customers and suppliers
- Transfer pricing documentation (if applicable)
Step 2 – Reconcile Corporate Tax with VAT
The FTA compares CT and VAT data to identify discrepancies.
Example: If VAT shows AED 5 m in sales but CT return shows AED 3 m, you’ll be questioned.
Step 3 – Review Deductible & Non-Deductible Expenses
Ensure all disallowable items (fines, personal costs, donations) are excluded from taxable income.
Step 4 – Check Related-Party Transactions
Document transfer-pricing policies and arm’s-length justifications.
Include intercompany agreements, pricing analyses, and support files
Step 5 – Prepare for FTA Queries
Auditors may request clarifications or additional data.
Respond promptly and professionally with supporting evidence
Step 6 – Conduct a Mock Audit
Engage your tax advisor or auditor to perform a mock Corporate Tax audit — reviewing sample invoices, ledgers, and reconciliations before the FTA arrives.
Common Red Flags
🚫 Late or inconsistent CT filings
🚫 Mismatch between VAT and CT data
🚫 Missing transfer-pricing documentation
🚫 Unrealistic expense deductions
🚫 Incomplete IFRS-compliant records
Penalties for Non-Compliance
- Failure to register: AED 10,000
- Late filing: AED 500–5,000
- Incorrect return: up to 200% of understated tax
- Obstruction of audit: further administrative penalties
Conclusion
Corporate Tax audits are now a reality in the UAE.
Preparation, accurate documentation, and IFRS alignment are the keys to avoiding penalties.
Call to Action
At Advanced AnalytIQ, we help UAE businesses prepare for FTA Corporate Tax audits through:
- Mock audit reviews
- Tax reconciliation support
- FTA audit documentation setup
- Ongoing compliance monitoring
👉 Contact us today to safeguard your business before your next FTA review.