Tax audits within the organizations and various companies play a key role in ensuring compliance with the laws. For companies and businesses to continue their operations, they must be abiding by all the rules and regulations. Tax audits are also conducted to ensure that the organization’s accounts records are accurate.
Every business must have accurate VAT records so that they face no problems during the VAT audits. If you cannot give satisfactory answers to the auditors regarding your VAT records, the chances of facing fines and penalties are higher. There is no need to scare yourself from such audits, as these audits are not meant to destroy or harm your company. With the help of these audits, you will get valuable information and sincere suggestions from the auditors. They will also help you track down any inaccuracy in your VAT records.
Keep scrolling down the article to understand which factors you shouldn’t miss while conducting value-added tax audits of your company.
Top 7 factors you shouldn’t miss during a VAT audit
Tax audits are one of the important operations and tasks for any organization. These audits are incomplete without certain steps and essential factors. You must look into all of the factors for successful audits. For VAT audits, there are also certain factors and steps that you shouldn’t miss at any cost.
Below are a few factors without which your VAT audit is incomplete.
VAT registration
The purpose of VAT audits is to find whether companies or the entities liable to pay the tax have registered for VAT or not. The authorities and the responsible organizations conduct these audits to identify which companies have registered and which haven’t registered either intentionally or unintentionally. These authorities will then decide whom to penalize and fine for not registering on time. If you haven’t registered for VAT, you must consult the best VAT consultancy in Dubai to get yourself registered and avoid penalties.
Compliance with the laws
There are certain rules and regulations based on which these taxes are charged, and being an indirect tax, the chances of frauds are higher. There might be possibilities that the sellers are charging the public with this tax for the products that are VAT exempted. That is why the authorities make sure that the people or the businesses liable to pay this tax to comply with the defined rules and regulations. People not abiding by the laws are penalized and fined.
VAT input
As a business or a manufacturer, you may need some good and services. So, whenever a business buys any item or goods, they pay a certain amount inclusive of the VAT to the seller. If you are VAT registered and your turnover is less than the required amount, you can claim a payback. These input and output amounts are very important to record so that the audits will define whether you can claim a refund or not.
VAT output
It is the opposite of input tax because it is the amount you will collect from the people who are the buyers of your products and services. Now the amount you collect from the sold goods will also include the VAT. So, you need to make sure that you are giving this collected amount of tax back to the people (Government). After getting the input and output tax values, the VAT audit will help you identify what tax amount you owe to the government and what amount you can claim back.
VAT levy
VAT is the tax that is received on every phase of product development. For a single product, the number of seller and buyers will be different at different stages. The exchange of VAT during this sale and purchase will be different. During the audits, it is very important to mention the levied tax so that if the end consumer is a business, they can claim a refund if eligible.
VAT composition scheme
For some businesses, VAT could be a burden, and these taxes could result in a loss for their businesses. Usually, startups and new businesses struggle with these types of taxes. That is why these audits are conducted to make sure that these young businesses and startups are not facing any difficulties. It is a type of scheme that is introduced to help the taxpayers with lower turnover rates. If your business turnover rate is lower, you will have to pay a fixed amount of tax under this scheme.
Exempted goods
The VAT audits are also performed to differentiate the number of goods manufactured by a manufacturer with no VAT implications. Certain goods and supplies have zero value-added tax implications, and businesses need to know these exempted goods. If you have paid any tax on the exempted goods, you can file a tax return with valid evidence. You can also reach the best VAT consultancy to guide you regarding tax returns and rules.
Get your VAT procedures done with the help of experts!
For avoiding any penalties and fines, always conduct VAT audits of your company. These audits will help you find whether your records are correct or do you need any VAT registrations. So, make sure you consult the VAT experts to get valuable advice and suggestion to help your business or company avoid penalties.
