The UAE tax environment is becoming more structured, and businesses are facing greater expectations around accurate records, tax reporting, and supporting documentation. The Federal Tax Authority (FTA) reported around 176,000 field inspection visits in 2025, an increase of about 89% compared with 2024. At the same time, the introduction of Corporate Tax has added another important area of compliance for UAE businesses.
This does not mean that every business will be subject to an FTA audit. However, it does show why businesses should not wait until they receive an audit notice before checking their records. This is where due diligence services can help. A proper due diligence review looks at the financial, tax, legal, and operational position of a business and identifies problems before they become expensive. For businesses in Dubai and across the UAE, Due Diligence Services in UAE can provide an independent review of records and help management understand where improvements are needed.
With the right support from experienced professionals such as Reyson Badger, businesses can identify gaps early, organise their documentation, and become better prepared for tax reviews and important business decisions.
Why Is FTA Scrutiny Increasing in the UAE?
The UAE has developed a more comprehensive tax framework over recent years. VAT has been in place since 2018, while Corporate Tax applies to financial years beginning on or after 1 June 2023. The FTA is responsible for administering and enforcing these tax laws.
The FTA's increased inspection activity is one indication that businesses need to take tax compliance seriously. Its 2025 annual report also showed continued growth in tax registration activity, with total tax registration transactions reaching 1.7 million, up 20%.
For businesses, the important point is simple: tax compliance should not be treated as something to check only when the FTA asks for documents.
Businesses should regularly check whether their accounting records, VAT returns, Corporate Tax information, invoices, contracts, and supporting documents are consistent.
What Does the FTA Look for During a Tax Audit?
A tax audit can involve a review of a business's records and information to determine whether it has complied with the applicable tax laws. Under the UAE Tax Procedures Law, the FTA has the authority to conduct tax audits to verify compliance.
Depending on the nature of the business and the purpose of the audit, the records reviewed may include:
- VAT returns and tax invoices
- Accounting records and financial statements
- Corporate Tax returns and supporting calculations
- Records of taxable supplies and imports
- Input and output VAT records
- Contracts and agreements
- Records supporting tax adjustments
- Intercompany transactions and related documentation
For VAT specifically, UAE legislation requires taxable persons to maintain records such as tax invoices, credit notes, records of supplies and imports, and tax records showing due and recoverable tax.
Common Reasons Businesses Face Problems During Tax Reviews
Many compliance problems are not caused by intentional errors. They happen because businesses grow quickly without updating their accounting and tax processes.
For example, a company may have incomplete bookkeeping records, incorrectly classify a transaction for VAT, fail to keep supporting documents, or report figures in its tax return that do not match its accounting records. Intercompany transactions can also require careful attention, particularly where related-party transactions and transfer pricing rules apply under Corporate Tax.
A regular review can help identify these issues before they become bigger problems.
What Are Due Diligence Services in UAE?
Due diligence services in UAE involve a detailed review of a business, transaction, investment, or potential business partner to understand its financial position, risks, obligations, and overall condition.
The purpose is simple: to know what you are getting into before making an important business decision.
For example, if you are planning to buy a company, invest in a business, enter into a partnership, or make a significant acquisition, you need more than the information provided by the other party. You need to independently check whether the information is accurate and whether there are hidden risks.
Due diligence can review financial records, tax matters, contracts, operations, ownership, employees, technology, and other areas depending on the transaction.
Due Diligence vs. a Standard Audit
A standard audit and due diligence are not the same thing.
An audit generally focuses on providing assurance over financial statements and whether they have been prepared in accordance with the applicable accounting framework.
Due diligence is more focused on investigating risks and supporting a specific business decision. It can look beyond financial statements and examine areas that could affect the value or safety of a transaction.
For example, due diligence may identify an unpaid tax liability, an unfavourable contract, an ownership issue, weak internal controls, or an operational problem that may not be obvious from the financial statements alone.
Types of Due Diligence Services in UAE
Different transactions require different types of due diligence. A professional provider can combine several areas depending on the business and the purpose of the review.
Financial Due Diligence
- Financial due diligence examines the financial health of a business.
- The review may include financial statements, revenue, expenses, assets, liabilities, cash flow, working capital, debt, and other financial information.
- It can also compare accounting records with supporting documents to identify unusual transactions or inconsistencies.
- For a potential acquisition, this helps the buyer understand whether the business is performing as claimed and whether there are financial risks that could affect the transaction.
Legal Due Diligence
- Legal due diligence examines the legal position of the business.
- This can include company ownership, contracts, licences, agreements, employment matters, intellectual property, disputes, and other legal obligations.
- The purpose is to identify legal issues that could affect the transaction or the future operation of the business.
Tax Due Diligence
- Tax due diligence has become particularly important for UAE businesses because of the VAT and Corporate Tax framework.
- A tax review can examine VAT registration, VAT returns, tax invoices, input VAT claims, Corporate Tax registration and filing, tax calculations, and relevant supporting records.
- Where applicable, the review can also consider related-party transactions and transfer pricing documentation.
- The objective is not simply to check whether a return was filed. It is to determine whether the underlying records and transactions support the tax position reported to the FTA.
Operational Due Diligence
- Operational due diligence looks at how the business actually operates.
- It may review internal processes, management systems, employees, technology, suppliers, customer relationships, inventory, and internal controls.
- This can help identify weaknesses that may affect the company's profitability or ability to continue operating efficiently after a transaction.
How Due Diligence Services Help Businesses Stay FTA Audit-Ready
Due diligence should not be viewed only as a service used when buying or selling a company.
A regular review can also help businesses understand whether their records are ready if the FTA asks questions.
The idea is straightforward: find the problem before the regulator finds it.
Pre-Audit Due Diligence
Before an FTA audit begins, businesses can review their tax and accounting records to identify potential gaps.
This may include checking:
- VAT registrations and returns
- Tax invoices and credit notes
- Accounting records
- Corporate Tax filings
- Supporting documents
- Bank and ledger reconciliations
- Intercompany transactions
- Related-party transactions
- Transfer pricing records where applicable
- Contracts and other important business documents
This type of review gives management an opportunity to correct errors and organise records before an audit takes place.
During an FTA Audit
If an FTA audit is already taking place, organised records can make the process easier. The business may need to provide documents and explanations in response to FTA requests. Having accounting, tax, and supporting records properly organised helps the business respond more efficiently. Under the Tax Procedures Law, the FTA has the authority to conduct tax audits to verify compliance with tax laws.
Post-Audit Review
Due diligence can also be useful after an audit. If an audit identifies weaknesses, businesses should not simply correct the immediate issue and move on. They should understand why the problem happened and improve the process that caused it. For example, if incorrect VAT treatment resulted from poor invoice classification, the business can update its accounting procedures and train employees to reduce the possibility of the same issue happening again.
Industries That Should Pay Particular Attention to Tax and Due Diligence
Every UAE business has compliance responsibilities, but some businesses have more complex transactions and therefore may require more detailed reviews.
- Real Estate and Property Businesses: Real estate transactions can involve significant values, different VAT treatments, complex contracts, and substantial documentation. Businesses operating in this sector should maintain clear records and understand the tax treatment of their transactions.
- Trading and Import/Export Businesses: Trading companies often deal with suppliers and customers in different countries. Customs records, import documentation, invoices, VAT treatment, and accounting records need to be properly aligned.
- Financial and Investment Businesses: Businesses operating in financial and investment-related activities may have complex transactions and regulatory obligations. Strong financial and compliance controls are particularly important.
- Construction and Contracting Companies: Construction businesses often manage long-term contracts, project costs, retention amounts, subcontractors, and progress payments. Proper accounting and documentation are therefore essential.
- E-Commerce Businesses: Online businesses may sell to customers in different locations and use overseas service providers, payment platforms, and digital systems. Their tax treatment can therefore require careful review.
- Free Zone Businesses: Free zone businesses should also understand how their transactions are treated for UAE tax purposes. Corporate Tax rules can vary depending on the company's activities and circumstances, so businesses should not assume that being in a free zone automatically removes all tax obligations.
Due Diligence Services in Dubai: What Should Businesses Check Now?
Businesses do not have to wait for an FTA notice to review their records. A practical Due Diligence Services in Dubai review should start with the areas that can create the greatest financial or compliance risk.
Check Your VAT Position
- Review whether VAT has been charged correctly, whether input VAT claims are supported, and whether VAT returns agree with the accounting records.
- The UAE VAT law requires taxable persons to maintain detailed tax records and supporting documents.
Review Corporate Tax Compliance
- Businesses should check their Corporate Tax registration, tax period, accounting records, taxable income calculations, return information, and supporting documents.
- The Corporate Tax Law allows the FTA to assess Corporate Tax in accordance with the Tax Procedures Law.
Review Related-Party Transactions
- Where businesses have transactions with related parties or connected persons, they should review whether the transactions have been properly recorded and whether relevant transfer pricing requirements have been addressed.
Check Financial Records
- Your financial statements should tell the same story as your accounting system, bank records, invoices, and tax returns.
- If different records show different figures without a clear explanation, this can create unnecessary questions.
Review Vendor and Business Partner Information
- Businesses should also understand who they are dealing with. Depending on the nature of the relationship and the applicable requirements, this may include checking ownership information, sanctions exposure, AML-related risks, and other compliance matters.
Key Benefits of Professional Due Diligence Services in UAE?
Professional due diligence gives businesses a clearer picture of their financial and compliance position. It can help identify problems before they become expensive, improve the quality of financial records, and strengthen internal controls.
It can also make a business more prepared when dealing with banks, investors, buyers, business partners, or regulators.
Most importantly, due diligence gives management better information for making important decisions. Instead of discovering a hidden liability after completing a transaction, the business can identify the issue before committing its money.
How to Choose the Right Due Diligence Services Provider in UAE?
Choosing the right provider is important because due diligence involves sensitive financial, tax, and business information.
Look for a provider with practical experience in UAE accounting, VAT, Corporate Tax, financial analysis, and regulatory requirements.
- It is also useful to consider whether the provider can review more than one area of the business. A financial review alone may not reveal a legal or operational problem.
- Clear reporting is equally important. A good due diligence report should explain the issue in simple terms, show why it matters, and provide practical recommendations.
- Before appointing a provider, businesses should also understand the scope of work, documents required, expected timeline, fees, and final deliverables.
How Reyson Badger Supports Due Diligence Services in UAE?
Reyson Badger provides Due Diligence Services in UAE for businesses that need a clearer understanding of their financial, tax, legal, and operational position.
- Our approach starts by understanding the purpose of the review. A company preparing for an acquisition may need a different review from a business preparing for an investment, partnership, restructuring, or internal compliance assessment.
- Our due diligence work can cover financial records, tax matters, commercial information, legal risks, operations, and other areas relevant to the assignment.
- The objective is simple: identify important risks, explain them clearly, and help management make a better-informed decision.
For businesses concerned about FTA readiness, our review can also help identify weaknesses in accounting records, VAT documentation, Corporate Tax information, and supporting records before they create bigger compliance problems.
Conclusion
The UAE's tax environment is becoming more structured, and businesses need to be prepared for greater scrutiny of their financial and tax records. The FTA's reported increase in market inspection activity, together with the wider Corporate Tax framework, highlights the importance of maintaining accurate records and strong compliance processes.
However, due diligence is not simply about preparing for an FTA audit. It is about understanding the financial, tax, legal, and operational position of your business before a problem affects your money or your decisions. Whether you are preparing for an acquisition, investment, partnership, internal review, or simply want to strengthen your compliance position, Due Diligence Services in Dubai and across the UAE can help you identify risks early.
With professional support from Reyson Badger, businesses can review their records, identify gaps, strengthen internal processes, and move forward with greater confidence.
FAQs
1. What are due diligence services and why are they important in the UAE?
Due diligence services involve a detailed review of a business, transaction, or investment to identify financial, tax, legal, commercial, and operational risks. They help businesses make informed decisions and avoid unexpected problems.
2. How do due diligence services help with FTA audit preparation?
Due diligence can identify gaps in accounting records, VAT documentation, Corporate Tax information, invoices, reconciliations, and other supporting records before the FTA reviews them. This gives businesses an opportunity to address weaknesses early.
3. What documents may the FTA request during an audit?
The documents depend on the purpose and scope of the audit. They may include accounting records, tax returns, tax invoices, credit notes, financial statements, transaction records, and other supporting documentation. UAE VAT legislation specifically requires taxable persons to maintain various tax and transaction records.
4. How often should a UAE business conduct due diligence?
There is no single frequency that applies to every business. A review may be particularly useful before an acquisition, investment, restructuring, major partnership, or other significant transaction. Businesses with complex operations may also benefit from periodic internal reviews.
