Many businesses in the UAE thought that keeping up with their VAT and corporate tax returns was sufficient for tax compliance. The FTA, however, no longer feels that is the case and in 2025 decided to review all tax data held about businesses, tax periods and invoices and now support from Tax Consultants UAE is crucial.

The FTA is getting very tough. During 2024, the FTA conducted 93,000 inspection visits (a rise of 135% compared to last year) and now have a system to detect companies with discrepancies in their VAT, corporate tax and excise tax data. The FTA's strategy between 2023-2026 specifically focuses on risk-based audits and collections.  

Since VAT and corporate tax operate under the same Tax Procedures Law, it is anticipated that the corporate tax audits will be very similar to the VAT audit processes and businesses will have to deal with notices, data requests and stringent audits following an analytical review by the FTA.

How Tax Consultants UAE help businesses with the FTA's data integration model.

The FTA combines information from various systems to spot discrepancies and potential risks:

VAT returns and corporate tax filings

The FTA is comparing the revenue figures on the various tax returns against each other. So, for example, if a VAT return declared AED120 million of taxable supplies and a corporate tax return declared AED100 million revenue, the company would be questioned as to the reasons for the discrepancy.  

There should be consistency in declared VAT supplies and declared corporate tax revenue. Records and expense data should be able to support claims for VAT recoverability and corporate tax deductibility, and financials should reconcile all tax returns.  

Emara Tax (the UAE's digital tax system and integration mechanism)

Emara Tax integrates information from various business systems. Any inconsistencies and mismatches in a business's ERP and accounting will be spotted with the analysis performed using these FTA tools.

E-invoicing due to come in from October 2026

The next significant change is e-invoicing, which will be implemented via accredited service providers and will submit real-time tax invoice data to the FTA for validation. The pilot phase will begin in July 2026 for businesses whose revenue is AED50 million+. Failure to comply will result in non-compliance and penalty fines and loss of recovery of input VAT for the customer. For all companies dealing with VAT consultancy and tax compliance, this must be viewed as more than a software change it represents an overhaul of their processes.

Five key areas which all Tax Consultants UAE keep an eye on

• Differences in VAT and corporate tax revenue : VAT returns and corporate tax returns are now expected to have consistent declared revenue. Any variations due to timing differences, exempt income, or exclusion of items must be appropriately accounted for.
• Frequent VAT refund claims: Companies with regular VAT refund claims are of greater interest to the FTA, and these must be properly supported by diligent documentation and accounting.
  
• Related-Party and transfer pricing transactions: The FTA looks very closely at transactions conducted within a corporate group (domestic and foreign). Proper transfer pricing documentation such as the Master File and Local File should be produced.
  
• Errors within an ERP system or accounting records: ERP information is being compared to VAT returns, corporate tax returns and bank accounts, making any incorrect mapping within the chart of accounts or any VAT reconciliation mistakes a serious risk, and penalties are up to AED10,000 per discrepancy.
  
• Late filings or inconsistency of tax filings : There are already severe penalties for registering late for a tax payment with a fixed penalty of AED10,000. Repeated adjustments or inconsistencies in tax filings are of increasing risk to companies with tax consultants in UAE.
  

Voluntary Disclosure support from Tax Consultants UAE

The FTA wishes to receive voluntary disclosures for corrections before it is noticed through its data integration. Companies that have not reviewed VAT and corporate tax consistency, their transfer pricing documentation or their records management policies need to act now.

Alliott UAE Support:

Businesses can benefit from support on the following:

• VAT return preparation and reconciliation 
• VAT consultancy and reviews 
• Corporate tax advisory and filing 
• VAT registration and maintenance 
• International tax advisory and transfer pricing documentation 
• E-invoicing compliance assessments 
• ERP compliance reviews and data reconciliation

Final Thoughts:

The new integrated and data-driven tax approach by the FTA now means the business environment is a lot tougher than it was. Keeping compliant is no longer just about registering on time; it is now a fundamental aspect of maintaining accurate and consistent information across all your tax filings, accounting systems and financial data.  

Companies who understand and proactively work towards compliance with experienced Tax Consultants UAE consultants will be in a much better position to mitigate their audit risks.