Sample Chart of Accounts Aligned to Tax Law

Introduction

With the introduction of the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022), businesses are required to prepare and maintain their accounting records in accordance with International Financial Reporting Standards (IFRS) while also ensuring compliance with tax reporting requirements.

A well-structured Chart of Accounts (CoA) is critical for accurate bookkeeping, smooth financial reporting, and effective corporate tax computation. Aligning the CoA with corporate tax requirements helps businesses identify taxable income, allowable deductions, and non-deductible expenses clearly.

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Why Align the Chart of Accounts with Tax Law?

• Simplifies Corporate Tax Computation – Clear separation of deductible and non-deductible accounts.

• Improves Audit Readiness – Easier to provide required breakdowns to the Federal Tax Authority (FTA).

• Supports Transfer Pricing – Helps track related-party transactions.

• Enhances Compliance – Aligns with disclosure requirements under Corporate Tax Law and IFRS.

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Key Components of a Tax-Aligned Chart of Accounts

1. Revenue Accounts

• Domestic Sales

• Export Sales

• Related-Party Sales (separately identifiable for Transfer Pricing purposes)

• Other Operating Income

• Exempt Income (e.g., dividends from qualifying shareholdings)

2. Cost of Goods Sold (COGS)

• Purchases (Local and Import)

• Direct Labor Costs

• Customs Duties & Import Charges

• Inventory Adjustments

3. Operating Expenses

• Salaries & Wages

• Rent & Utilities

• Depreciation & Amortization

• Professional Fees

• Marketing & Advertising

4. Tax-Specific Accounts (Critical for UAE Compliance)

• Non-Deductible Expenses:

o Fines & Penalties

o 50% of Entertainment Expenses

o Donations to Non-Approved Entities

o Non-Business Personal Expenses

• Deductible Expenses (clearly segregated for reconciliation):

o Approved Charitable Contributions

o Bad Debt Write-Offs (meeting conditions)

o Interest Expense (subject to 30% EBITDA limitation)

5. Financial Income & Expenses

• Interest Income (Taxable/Exempt split)

• Interest Expense (Deductible vs. Restricted)

• Foreign Exchange Gains/Losses

6. Related Party & Transfer Pricing Accounts

• Intercompany Receivables

• Intercompany Payables

• Management Fees (Intercompany)

• Royalty/License Fees

• Intercompany Loan Interest

7. Equity & Reserves

• Share Capital

• Retained Earnings

• Reserves (Legal, Tax Adjustments, etc.)

8. Tax Accounts

• Current Tax Payable

• Deferred Tax Assets/Liabilities

• Tax Adjustments (Add-backs and Deductions)

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Sample Structure: Simplified CoA Extract

Revenue

• 4000 – Domestic Sales

• 4010 – Export Sales

• 4020 – Related Party Sales

• 4100 – Dividend Income (Exempt)

Expenses

• 5000 – Salaries & Wages

• 5010 – Rent & Utilities

• 5020 – Professional Fees

• 5030 – Depreciation

• 5100 – Marketing & Advertising

• 5200 – Non-Deductible Fines & Penalties

• 5210 – Entertainment (50% Non-Deductible)

• 5220 – Donations (Non-Approved)

Finance

• 6000 – Interest Income (Taxable)

• 6010 – Interest Income (Exempt)

• 6100 – Interest Expense (Deductible)

• 6110 – Interest Expense (Restricted – 30% EBITDA)

Tax Accounts

• 7000 – Current Tax Payable

• 7010 – Deferred Tax Liability

• 7020 – Deferred Tax Asset

• 7100 – Tax Adjustments – Add-Backs

• 7110 – Tax Adjustments – Exempt Income

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Benefits of a Tax-Aligned CoA

• Efficient Corporate Tax Returns – Simplifies reconciliation between accounting and tax reporting.

• FTA Audit Ready – Clear categorization of non-deductible expenses and exempt income.

• Supports Group Relief – Easier identification of losses for group set-offs.

• Enhances Transparency – Improves financial reporting for stakeholders and regulators.

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Conclusion

A properly structured Chart of Accounts aligned to UAE Corporate Tax Law provides businesses with clarity, compliance, and control. By clearly identifying taxable income, deductible expenses, and non-deductible items, businesses can streamline their tax computations, minimize errors, and ensure readiness for FTA audits.

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✍️ Prepared by Sheikh Anwar Accounting and Auditing LLC – Registered Auditor with the Ministry of Economy (Auditor Entry No. 5817, Company Entry No. LC4695-01). We specialize in Corporate Tax, VAT, Transfer Pricing, and AML Compliance, assisting UAE businesses in setting up accounting systems aligned with tax laws.

📧 Contact us: info@sa-auditors.com

🌐 Visit us: www.sa-auditors.com