Definition

A Tax Reconciliation Statement is a detailed schedule that explains the differences between a company’s accounting profit and taxable income under UAE Corporate Tax law. It aligns financial reporting with tax requirements, ensuring accurate computation of Corporate Tax payable.

Key Points

• Required as part of the Corporate Tax return submission through the EmaraTax portal.
• Reconciles accounting profit (as per IFRS) with taxable profit after add-backs, deductions, and exemptions.
• Must disclose non-deductible expenses, exempt income, and temporary timing differences.
• Serves as a key audit document for the Federal Tax Authority (FTA).
• Typically prepared by the finance or tax team and reviewed by auditors before filing.

Practical Example

A company reports AED 2 million accounting profit, but adds back AED 100,000 of non-deductible entertainment costs and deducts AED 200,000 of exempt dividend income. The resulting taxable income in the reconciliation statement is AED 1.9 million.

Why It Matters

Accurate tax reconciliation ensures compliance with UAE Corporate Tax regulations, minimizes audit risk, and provides transparency between accounting and tax reporting.