41,500-plus inspections across the country last year—that number has more than doubled so far in the first two months of this year, with tax inspectors conducting more than 93,000. “With corporate tax filing season still continuing and the enhanced powers the FTA (and others) gained, in addition to the upcoming January 2026 Tax Procedure Law’s effective date, there will be an increasing number of companies facing the likelihood of an audit notice over the next few months.” What remains unclear for this year is if the FTA will be examining your business.

This is not a scratch of the surface ‘add-on tax’ work hastily assembled with some AU company returns fresh out of the press—that would be including all 3,457,891 of your prior invoices, journal entries, and reconciliation entries ever worked at your fingertips, 100% caught up and well managed. What does this usually all come back to? One thing. Ready and clean bookkeeping.

This isn’t some piecemeal tax work put together when the Australian company tax returns have rolled into view—it is every single invoice and reconciliation and journal entry you have ever put your hand on right there at your fingertips, up-to-date and accounted.

What an FTA Audit Actually Looks Like

What is an FTA audit? An FTA audit (AEOEOI or OECA, as known by many countries’ revenue and customs authorities) basically refers to looking to make certain your company tax return or VAT return is in accordance with real-world bank and trading figures. An FTA contact will likely have havealready compared your return to your company tax and your refunds and have formed quite a strong opinion about how/why there might be a discrepancy between the two. This type of audit can take place in your own office, called a desk-based audit. You will have to visit theirs, called a field-based audit.

For a VAT audit, the FTA has to tell you in person at least 5 working days beforehand. From then on, the questions start, and there will be an expectation that you can provide documentation quickly. Poorly submitted/non-submitted documentation will only invite more responses.

This is what many business owners do not know when it is too late – the onus of proof is on you, not the FTA. If you want to claim a deduction and/or input tax recovery, you have to supply the documents proving it. No paperwork, no argument. It is up to you, not the FTA, to prove you were correct.

What Actually Triggers an Audit

Audits aren’t random. The FTA’s own strategy confirms selection is risk- and data-driven. The patterns that consistently draw attention include the following:

• A mismatch between VAT returns and corporate tax returns for the same accounting period. 
• An unusual claim or deduction (whether based on related-party transactions, expense claims for which there is no valid documentation, etc.). Late, inconsistent, or amended return submissions.
• There is a missing invoice or the contract that backs up the figure included in a return.
• Missing invoice numbers or sequences that would easily be identified by automated systems. 
• You are using only spreadsheets to run your accounts, and there is no audit trail, backup, or version control of any kind. 
• Your reconciliations aren’t done monthly, meaning that individual mistakes quickly escalate and accumulate.
• Delayed VAT refund claims submitted near the deadline.
• You have fallen behind on becoming compliant with e-invoicing requirements (once e-invoicing regulations start to impact you), as paper/PDF invoices will no longer be accepted as evidence.
• Transactions falling into high-risk sectors, such as real estate, trading, gold, logistics, hospitality, e-commerce, construction, etc. 
• Even minimal discrepancies can have a major impact. A 2-3 percentage point discrepancy between your actual ledger and the return is sufficient for your routine review to quickly transform into a detailed inquiry.

If your VAT and corporate tax numbers aren’t telling the same tale or your connected party transactions don’t comply with the arm’s length principle, you have already placed yourself on the list even before your invoices have been assessed.

How Long You Actually Need to Keep Records

Retention isn’t one flat number, and this is where a lot of businesses get caught out:

• VAT: at least 5 years from the end of the tax period.
• Corporation Tax: at least 7 years from the end of the relevant tax period.
• Property: 15 years to accommodate the life of these assets and their tax treatment.
• Capital assets (i.e., plant, machinery, etc.): 10 years to account for wear and tear and subsequent disposal.

Since most invoices and contract items contribute to both your VAT return and your corporate tax situation simultaneously, most businesses will pragmatically hold everything for seven years rather than the trouble of operating two clock towers! That clock can also continue: once the FTA commences an investigation/disagreement within the normal parameters, it stays ticking until that entire procedure concludes, plus a bit more if you make a late voluntary disclosure. Then there’s the speed—should the FTA query something as part of an investigation, you’ve got two business days to provide it, not ‘Let’s look into it next week.’

Furthermore, from Jan 2026, the standard FTA investigation period is five years from the end of the relevant tax period. That period can extend up to fifteen years if the matter turns to an FTA investigation relating to fraud and undeclared tax positions (e.g., nothing at all registered). An invoice dating from three years ago can suddenly resurface during an FTA investigation when the person who created or used it has long since departed.

The answer is meticulous accounting, which bridges that gap before it ever even exists. Balanced bank accounts, coded expense transactions, and organized source documents mean when they come knocking, you’ll have whatever’s in their hand within hours, rather than a frantic scramble to piece it together under a 5-day notice.

The Records You Actually Need to Keep

“Keep your records” is easy to say and harder to do consistently. In practice, an audit-ready file covers:

1. Sales & Dispatch Documents—all tax invoices issued to customers, credit/debit notes, e-invoices, and delivery proofs of items supplied to clients.
   2. Purchase & Receipt Documents—vendor invoices, all import and customs documents, credit notes from suppliers, and evidence of payment to clients.
   3. Returns & Reconciliation – VAT returns filed, corporation tax returns filed, and working documents used to compute the returns and reconciliations, such as VAT register reconciliations to VAT filings.
   4. GL & Banking Documents—monthly trial balance, bank recon, and AP/AR aging for clients and suppliers.
   5. Contracts – Customer, vendor, and lease contracts (some transactions can be taxed differently if there’s a specific structure within these contracts).
2. Payroll – salary records, WPS data, employment contracts.

7. Fixed asset register, inventory counts/records.

8. Corporation Tax additional documents – IFRS-compliant financial statements, IFRS-based P&L accounts, and balance sheets. Transfer pricing documentation for companies with related party transactions if relevant.

If a figure appears anywhere on a return, there should be a document behind it that you could hand over today.

What It Costs When the Books Aren’t in Order

When records are missing or incomplete, the FTA doesn’t give you the benefit of the doubt. It raises an estimated assessment based on its own numbers, and the penalties stack up from there:

Failure to maintain proper records: AED 10,000 on the first offense and AED 20,000 on repeated offenses within 24 months, according to the corporate tax penalty matrix, per offense. One audit might discover various misallocations, outstanding transfer pricing documentation, mismatched intercompany figures, and insufficient documentation leading to many penalties on a single visit. Added to that is a separate recording penalty for VAT.

• Late corporate tax filing: AED 500 a month the first year, 1000 a month thereafter.
• Late or unpaid tax: 14% per year in addition to any penalty. According to a penalty reform that will take effect from April 2026, this is a flat, non-compounded rate for VAT, corporate tax & excise tax in comparison to previous tiers of penalization.
• Late registration: A fixed AED 10,000 fee, even if a business felt they were exempt and were below that threshold.

They do not necessitate an order from a judge or a finding of criminal culpability. Such occurrences carry their own punitive effects for being tardy with documents or submitting something beyond the specified date. Poor bookkeeping is the origin of all manner of penalties beyond the one for under-paying your taxes.

What “Audit Ready” Bookkeeping Actually Means

Being audit ready isn’t a once-a-year exercise. It’s a standing discipline:

1. Monthly and not annually. Bank accounts, credit cards, and online payment systems reconcile monthly against the ledger. 
2. All contracts, invoices, and bank statements are digitally cataloged and searchable; any 48-hour request doesn’t descend into chaos.
3. VAT and corporate tax are reconciled against each other; it’s the first number the FTA will match for discrepancies.
4. All related-party and intercompany transactions are fully and meticulously documented against arm’s-length principles, ready for the inspector’s eyes.

5. Seven years’ retention maintained, beyond company termination, license renewal, or structure changes.

6. Retrieval tested and not presumed.

A file buried in a dusty old server room or inaccessible folder is useless to FTA. See if your team can search for a five-year-old invoice now.

The result of consistently approaching this in a streamlined fashion and treating documentation as part of the daily operation: very minimal adjustment, if any, comes from their subsequent audits. Those who don’t: spend two weeks digging through a WhatsApp chat group trying to re-compile the past twelve months of transactions upon seeing the FTA audit notice arrive.

Get Your Books Audit Ready Before the FTA Asks

It’s much more difficult to resurrect a bookkeeping process after audit pressure has begun. But accounting services in Dubai offer to restore your bookkeeping records, prepare for and file VAT returns, prepare accounts for company tax, and complete any outstanding bookkeeping needs, bank reconciliations, and corporate tax submissions for any business on mainland Dubai and in any of the free zones for a low and predictable monthly fee. Book a FREE discussion today to see exactly where you stand.

If your audit exposure is specifically related to the configuration of your company, licensing, the free zone framework, or visa and PRO matters, Markef can handle setup and licensing and the general regulatory framework governing any UAE business.

Whichever way you look at it, the entities that come out of an FTA audit the easiest are the ones that at no point in the process are asked to complete an audit preparation exercise and have all of their accounting records ready.

Frequently Asked Questions

Q1. How long do I need to keep accounting records in the UAE?

Ans. It depends on what documents you have—VAT records are five years; if they are corporate tax, then it’s seven; if they were property, then they might be fifteen, but it’s generally the corporate tax and real estate that cover real estate issues and the personal ones. It’s easier for most businesses to keep physical and electronic copies together for seven years instead of remembering two separate dates.

Q2. What documents does the FTA ask for during an audit?

Ans. Normally, it would be your VAT and corporate tax returns, general ledger, bank statements and reconciliations, sales and purchase invoices, contract, tax elections, and anything that supports deductions or related-party entries. If you have a figure on a tax return, they will ask you how it supports the figure.

Q3. Can the FTA still audit my business after I close or deregister?

Ans. Yes. The seven-year retention period is not suspended when a license is revoked or a business dissolved. If the records you held during the last few years of operation need to be produced in the future for any request, they will still be subject to this requirement.

Q4. Does having a bookkeeper mean I’ll never be audited?

Ans. No. Audit selections are primarily based on risk and data, meaning that even well-maintained business books can be targeted. However, sound bookkeeping alters the impact of the audit. While businesses with well-organized and balanced books can often be reviewed and assessed for an audit within days of a filing with only a few adjustment items, businesses that have not maintained accurate books stand a greater chance of an estimate being given on top of penalties.