UAE FTA tax audit red flags

Suppose the financial statements show one revenue figure but the Corporate Tax return contains a different amount without a clear explanation. That difference needs to be supported. The same applies to:

• Expenses
• Fixed assets
• Tax adjustments
• Taxable income
• Related-party transactions

A good audit file should make the movement from financial accounts → tax adjustments → taxable income → tax return easy to follow.

A business may record an expense in its accounts, but that does not automatically mean the tax treatment is correct. For every material expense, ask:

• What was purchased?
• Why was it purchased?
• Who supplied it?
• Is there an invoice?
• Is there a contract or other supporting evidence?
• How was it recorded in the accounts?

Weak documentation can make an otherwise genuine transaction difficult to defend.

A large tax adjustment deserves careful review. For example:

• A very large deduction
• A significant one-time adjustment
• A major change in taxable income
• A substantial adjustment between accounting profit and taxable income

The issue is not simply that an adjustment is large. The important question is:
Can the company explain and support it?

Transactions involving related parties or connected persons can require additional attention. Examples include:

• Management fees
• Loans
• Interest
• Shared services
• Asset transfers
• Group charges
• Intercompany purchases
• Intercompany sales

The company should maintain appropriate agreements, invoices, calculations and other supporting documents. Where transfer pricing rules apply, the required documentation should also be considered.

The FTA has specifically identified records of assets, including purchases and disposals, among the records that taxable persons should maintain. This means companies should be able to trace important assets. For example:

Purchase → invoice → accounting entry → asset register → depreciation/tax treatment → disposal

If the asset register does not agree with the accounting records, investigate the difference before an FTA review.

If a business is VAT registered, its VAT records should be reconciled with its accounting system. Possible warning signs include:

• VAT return does not reconcile with sales
• Input VAT does not match purchase records
• Missing tax invoices
• Incorrect VAT treatment
• Incorrect Tax Registration Number
• Unexplained VAT adjustments
• Differences between VAT returns and the general ledger

A simple monthly reconciliation can identify many of these problems before they become larger issues.

Corrections are not automatically a problem. Businesses make genuine mistakes. However, repeated errors can indicate weak tax controls. Look for patterns such as:

• Repeated invoice corrections
• Repeated VAT adjustments
• Frequent changes to tax returns
• Recurring classification mistakes
• Repeated missing documents

The objective should be to identify why the error keeps happening, not simply correct it each time.

Information submitted through different tax processes should be consistent where the underlying facts are the same. Check items such as:

• Legal entity name
• TRN
• Business activities
• Revenue
• Financial year
• Related entities
• Ownership information
• Tax registration details

A mismatch does not automatically mean non-compliance, but unexplained differences should be investigated.

If a company applies a special tax treatment, it should keep evidence showing why that treatment applies.

For example, where a business claims a particular treatment based on specific conditions, keep the documents proving those conditions.

Do not rely only on an accounting software setting or a note in the ledger.

The supporting evidence matters.

Late compliance can create penalties and should therefore be monitored.

The FTA has reminded Corporate Tax taxpayers that Tax Returns and Corporate Tax payments are generally due within nine months from the end of the relevant Tax Period.

For example, for a company whose Tax Period ends on December 31, 2025, the FTA gave September 30, 2026 as the filing and payment deadline in its example.

A tax compliance calendar should therefore be maintained.

This is a simple but important test. If someone asks:
“Where did this number come from?”
Your finance team should be able to answer. For important tax-return figures, maintain a clear audit trail. For example:
AED 2,000,000 revenue should be traceable to:

Sales ledger → invoices → accounting system → financial statements → tax calculation → Tax Return

The easier this trail is to follow, the easier it is to defend the reported figure.

Companies with relevant related-party or connected-person transactions should review their transfer pricing obligations. Do not wait until an FTA review to discover that:

• Agreements are missing
• Pricing calculations are unavailable
• Supporting analysis is incomplete
• Related-party transactions were not properly identified
• Required documentation was not prepared

The exact requirements depend on the taxpayer and applicable rules, so the documentation should be assessed based on the company's circumstances.

This is especially important in 2026. The FTA published FTA Decision No. 4 of 2026 concerning the rules and requirements for maintaining information contained in accounting records and commercial books. The decision was published on August 20, 2026. Therefore, companies should review their record-keeping processes against the current requirements instead of relying only on an old internal checklist.

A simple internal test is useful: Pick 10 large transactions at random. Can your finance team quickly produce:

• Invoice
• Contract
• Payment evidence
• Accounting entry
• Related correspondence where relevant
• Tax treatment
• Supporting calculation

If it takes days to find basic documents, your audit-readiness is weak.