UAE Corporate Tax returns must be based on accounting profits prepared under IFRS, adjusted according to tax law provisions.
Many businesses mistakenly assume their IFRS profit equals taxable profit — but that’s rarely the case.
This guide explains how to reconcile It financial statements with UAE Corporate Tax requirements.
Step 1 – Start from IFRS-Based Net Profit
Your accounting profit per It is the foundation. It reflects all revenue, expenses, and adjustments recognized under international standards.
Step 2 – Identify Tax Adjustments
Corporate Tax Law requires specific additions or deductions to arrive at taxable income.
Common upward adjustments (add-backs):
- Non-deductible expenses (fines, entertainment, non-business items)
- Unrealized gains on fair-value revaluation
- Related-party non-arm’s-length expenses
Common downward adjustments (deductions):
- Unrealized losses
- Tax-exempt income (dividends, participation exemption)
- Prior-year losses carried forward
Step 3 – Adjust for Depreciation Differences
IFRS depreciation may differ from tax depreciation under FTA rules.
Maintain a separate tax depreciation schedule aligned with CT requirements.
Step 4 – Record Deferred Tax (if applicable)
Under IFRS, deferred tax arises from temporary differences between accounting and tax bases.
Though not part of the CT return, it improves financial transparency.
Step 5 – Prepare a Reconciliation Statement
Create a “Profit Before Tax to Taxable Income Reconciliation” as part of your CT working file.
It’s required during FTA audits and shows how you derived your final taxable income.
Example
| Adjustment | AED |
| IFRS profit before tax | 1,000,000 |
| Add back: fines | +20,000 |
| Less: exempt dividends | –50,000 |
| Taxable income | 970,000 |
Conclusion
Bridging IFRS and UAE Corporate Tax profit isn’t complex if you maintain clear records and understand the adjustments.
Accurate reconciliation avoids disputes and supports audit readiness.
Call to Action
At Advanced AnalytIQ, we align your IFRS reporting with UAE Corporate Tax filings — ensuring consistency, accuracy, and compliance.