Sample Corporate Tax Reconciliation Format

Introduction

Under the new UAE Corporate Tax regime, businesses must ensure that their accounting profit reported in financial statements is correctly adjusted to arrive at the taxable income for Corporate Tax purposes. This process is known as tax reconciliation.

Tax reconciliation is a critical step in Corporate Tax compliance because accounting standards (IFRS) and tax laws differ in their treatment of certain items. A well-prepared reconciliation provides transparency and helps avoid penalties during audits or FTA reviews.

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What is Corporate Tax Reconciliation?

Corporate Tax Reconciliation is the process of aligning:

• Net profit (accounting basis) from audited financial statements, with

• Taxable income (tax basis) as defined under UAE Corporate Tax Law.

This reconciliation involves adding back non-deductible expenses, subtracting exempt income, and adjusting for temporary/timing differences.

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Why is it Important?

1. Compliance – Ensures accuracy of corporate tax filings.

2. Transparency – Provides auditors and regulators with a clear trail.

3. Error Detection – Identifies misclassified expenses or missed deductions.

4. Audit Readiness – A structured reconciliation reduces disputes with the FTA.

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Sample Corporate Tax Reconciliation Format

Here’s a structured format businesses can follow:

Step 1: Start with Net Profit Before Tax

From the audited financial statements (prepared under IFRS).

Example:

Net Profit Before Tax (per financial statements): AED 5,000,000

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Step 2: Add Back Non-Deductible Expenses

Certain expenses are not allowed under tax law.

• Penalties and fines: AED 100,000

• Entertainment expenses (non-deductible portion): AED 50,000

• Donations to unapproved entities: AED 75,000

Total Add-Backs: AED 225,000

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Step 3: Deduct Exempt or Non-Taxable Income

Some income streams are exempt from Corporate Tax.

• Dividend income from qualifying shareholding: AED 400,000

• Income from foreign PE (exempted): AED 200,000

Total Deductions: AED 600,000

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Step 4: Adjust for Temporary Differences

Timing differences between accounting and tax treatment:

• Depreciation difference (accounting vs. tax): +AED 50,000

• Provision for doubtful debts (allowed later): +AED 75,000

Net Adjustment: AED 125,000

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Step 5: Arrive at Taxable Income

Net Profit Before Tax: AED 5,000,000

• Non-Deductible Expenses: AED 225,000

– Exempt Income: (AED 600,000)

• Temporary Differences: AED 125,000

Taxable Income: AED 4,750,000

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Step 6: Apply Corporate Tax Rate

• 0% on first AED 375,000

• 9% on remaining AED 4,375,000

Corporate Tax Payable: AED 393,750

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Final Reconciliation Table

Particulars Amount (AED)

Net Profit Before Tax (FS) 5,000,000

Add: Non-Deductible Expenses 225,000

Less: Exempt / Non-Taxable Income (600,000)

Add/Less: Temporary Differences 125,000

Taxable Income 4,750,000

Corporate Tax (0% up to 375,000; 9% thereafter) 393,750

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Best Practices for Tax Reconciliation

1. Maintain Clear Documentation – Keep schedules for all adjustments.

2. Review Regularly – Conduct quarterly reconciliations, not just at year-end.

3. Separate Accounting vs. Tax Records – Avoid confusion between IFRS and CT adjustments.

4. Leverage Technology – Use accounting software or ERP with tax modules.

5. Engage Professionals – Seek guidance on complex items like transfer pricing, group relief, or foreign tax credits.

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Conclusion

A structured Corporate Tax Reconciliation Format ensures businesses stay compliant with UAE Corporate Tax Law and avoid unnecessary penalties. It bridges the gap between financial reporting and tax computation, giving clarity to both management and regulators.

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How We Can Help

At Sheikh Anwar Accounting & Auditing LLC, we assist businesses with corporate tax reconciliations, filing, and advisory services. Our experts prepare detailed reconciliations aligned with IFRS and UAE CT law, ensuring compliance and optimisation.

📩 Contact us at info@sa-auditors.com | 🌐 www.sa-auditors.com