Common FTA Audit
Exposure Areas
Many VAT penalties arise not from late filing, but from interpretation errors and missing evidence.
This VAT Risk Checklist highlights high-risk VAT positions that frequently result in FTA audit adjustments, assessments, and penalties.
High-Risk Areas Covered
Blocked & Restricted Input VAT
- Entertainment and hospitality provided to customers or third parties
- Staff benefits not contractually required
- Motor vehicles available for personal use
- Gifts and promotional items exceeding acceptable thresholds
Mixed Supplies & Partial Exemption
- Businesses making both taxable and exempt supplies
- Overheads claimed without apportionment
- Incorrect recovery of input VAT on shared costs
Reverse Charge & Cross-Border Services
- Services received from non-resident suppliers
- Imported management, IT, and professional services
- Incorrect application of place-of-supply rules
Capital Assets Scheme
- Capital assets not tracked for adjustment periods
- Change in use not reflected in VAT returns
Designated Zones & Special Transactions
- Goods vs services confusion in Designated Zones
- Insufficient evidence for zero-rated exports
When This Checklist Is Critical
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Disclaimer
This checklist is for general information only and does not constitute tax advice.
What does the VAT Risk Checklist do?
This checklist highlights the VAT positions that are most often questioned in an FTA audit. It covers blocked and restricted input VAT, mixed supplies and partial exemption, reverse charge on cross-border services, the capital assets scheme and designated zones.
How to use it
- Read each risk area and decide whether it applies to your business.
- For each one that applies, check how you treat it today and what evidence you hold.
- Review the areas where your treatment or evidence is uncertain.
VAT Risk Checklist: questions and answers
Which VAT areas carry the most risk?
Input VAT on blocked items such as entertainment, apportionment for businesses with exempt supplies, reverse charge on imported services, adjustments on capital assets, and supplies involving designated zones.
How is this different from the VAT Health Checklist?
The health checklist tests your basic VAT processes. This checklist focuses on technical positions where the treatment itself may be wrong.
Is the result tax or financial advice?
No. The result is an estimate for planning, based only on the figures and answers you enter. It is general information, not legal, tax or financial advice. For a decision, have your position reviewed against your full facts.
Related
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General information only, not legal or tax advice.
Valorin is an independent advisory firm, not affiliated with the FTA or MoF.