The Role of Internal Audit in Corporate Tax and VAT Compliance

The Role of Internal Audit in Corporate Tax and VAT Compliance

In today’s rapidly evolving regulatory environment, internal audit plays a vital role in helping businesses in the UAE stay compliant with Corporate Tax and Value Added Tax (VAT) requirements. With the introduction of Corporate Tax and the ever-present obligations under the VAT regime, companies are under increased scrutiny from the Federal Tax Authority (FTA). An effective internal audit function can be the difference between smooth compliance and costly penalties.

Why Internal Audit Matters for Tax Compliance

Internal audits are more than just financial reviews—they are a proactive tool for risk identification and process improvement. Here’s how they contribute to Corporate Tax and VAT compliance:

• Review of Tax Procedures: Internal audits ensure that tax processes such as VAT return filing, input/output VAT reconciliation, and Corporate Tax calculations are accurate and in line with FTA regulations.

• Verification of Documentation: Auditors assess the adequacy of supporting documents, including tax invoices, expense records, and financial statements used for tax filings.

• Detection of Errors & Misstatements: Internal auditors help identify discrepancies early, reducing the likelihood of audits, penalties, and reputational damage.

• Monitoring of Policy Implementation: They ensure that internal tax policies are being followed consistently across departments.

• Strengthening of Internal Controls: By reviewing tax workflows, auditors can recommend better controls and automation to reduce the risk of non-compliance.

Internal Audit and Corporate Tax in the UAE

With Corporate Tax now applicable to UAE entities exceeding certain thresholds, the role of internal auditors has become even more significant. Internal audit teams review:

• Taxable income calculations

• Group tax structures and exemptions

• Transfer pricing documentation

• Alignment with IFRS and local accounting standards

A robust internal audit can assist in preparing for Corporate Tax filings and FTA reviews, ensuring that your business is compliant and audit-ready.

VAT Compliance and Internal Audit

For VAT, internal audits cover:

• Timely and accurate VAT return submissions

• Reconciliation of VAT ledgers with accounting records

• Cross-checking of input tax claims

• Ensuring proper tax treatment for zero-rated and exempt supplies

• Review of VAT treatment in intercompany and cross-border transactions

These periodic checks help maintain the accuracy and transparency needed to avoid VAT-related disputes with the FTA.

Partner with ALWAHAT ACCOUNTS AND INTERNAL AUDIT SERVICES

At ALWAHAT ACCOUNTS AND INTERNAL AUDIT SERVICES, we specialize in conducting comprehensive internal audits tailored to Corporate Tax and VAT compliance requirements. Our experienced team helps UAE businesses:

• Identify risks and control gaps

• Ensure compliance with FTA regulations

• Prepare for external audits and FTA inspections

• Develop tax governance frameworks

Whether you're a startup, SME, or a large corporation, our audit and consultancy services are designed to align your financial processes with UAE tax laws and best practices.

Book a free consultation with our experts today to assess your company’s tax compliance health.

Disclaimer

This blog is for informational purposes only and should not be considered as legal or tax advice. For the most accurate and updated tax guidelines, please refer to the official Federal Tax Authority (FTA) website