Reconciling VAT returns with Corporate Tax revenue

The short answer

The FTA holds both returns, and turnover declared for VAT and revenue reported for Corporate Tax are two views of the same business. They will rarely match exactly, and they do not have to. What you need is a bridge: a reconciliation, entity by entity and year by year, that starts from revenue in the financial statements and explains every difference to the supplies declared in the VAT returns for the same months.

An unexplained gap is one of the first things a risk review or an audit will ask about. A bridge prepared at year-end turns that question into a two-minute answer.

Which VAT figures to compare

Use the net value of standard-rated supplies (Box 1), zero-rated supplies (Box 4) and exempt supplies (Box 5). Leave out Box 3, which reports purchases under the reverse charge, and the import boxes. Then line up the periods. VAT quarters are often staggered, for example ending in February, May, August and November, so they will not match a December financial year. Use monthly figures, or add up the returns covering the financial year and adjust the edges.

The legitimate reconciling items

• Advances: VAT is due when a payment is received, but under IFRS 15 an advance is a liability until the work is done. Advances received this year for next year's work add to VAT supplies; last year's advances recognised as revenue this year come off.
• Unbilled revenue: revenue recognised on work in progress or continuous services where no invoice has been issued and no payment received may not yet be a supply for VAT.
• Supplies that are not revenue: the sale of fixed assets is a supply at its full price for VAT, but the accounts show only a gain or loss. Deemed supplies, such as gifts or private use, have no revenue at all.
• Income that is not a supply: dividends, fair value gains and similar items appear in the accounts but are not consideration for a supply.
• Exchange rates: VAT uses the Central Bank rate on the date of supply, while the books may use another rate (see foreign-currency invoices).
• Credit notes and corrections: a credit note issued in the next period, or a voluntary disclosure, moves VAT turnover between periods.
• Agent or principal: a business acting as an agent under IFRS 15 shows only its commission as revenue, while its VAT treatment may follow the gross supply.
• Different perimeters: a VAT tax group files one return for several companies, while each company, or a Corporate Tax group under its own 95% rule, reports separately. Reconcile at the same perimeter on both sides.

Building the bridge

• Start with revenue per the audited financial statements for the financial year.
• Add and subtract each reconciling item above, with a schedule or ledger report behind each line.
• The result is expected VAT supplies. Compare it with Box 1 + Box 4 + Box 5 for the same months.
• Investigate any unexplained difference until it is either explained or corrected, and correct VAT errors through a voluntary disclosure where the rules require it.
• File the bridge with the Corporate Tax working papers and keep it for the seven years Article 56 of the Corporate Tax Law requires.

Worked example

A company's revenue for 2025 is AED 48,500,000. It received AED 1,200,000 of advances in 2025 for 2026 deliveries (add), recognised AED 900,000 of advances that were taxed for VAT in 2024 (subtract), and holds AED 600,000 of unbilled revenue with no tax point yet (subtract). It also sold vehicles for AED 350,000 (add). Expected VAT supplies: 48,500,000 + 1,200,000 − 900,000 − 600,000 + 350,000 = AED 48,550,000.

Box 1 + Box 4 + Box 5 for January to December 2025 total AED 48,610,000. The unexplained difference is 48,610,000 − 48,550,000 = AED 60,000, about 0.12% of the expected figure. It turns out to be a December credit note issued in January. Once that is documented, the bridge closes. Try the VAT to Corporate Tax reconciliation calculator with your own figures.

How Hysaab applies this

Hysaab compares VAT-declared turnover with book revenue for each entity, nets off the drivers it can attribute (timing, out-of-scope income, asset disposals and intercompany items) and flags any unexplained residual as a mismatch, so the bridge is built during the year rather than reconstructed when the Corporate Tax return is due.

Questions people actually ask

Keep reading

• Tool: VAT to Corporate Tax revenue reconciliation
• Guide: UAE VAT and Corporate Tax deadlines, in one place
• Guide: FTA VAT audit: what actually happens, and how to prepare your records
• Guide: Foreign-currency invoices: which rate for UAE VAT?
• Guide: VAT voluntary disclosure in the UAE: when Form 211 is mandatory, and what it costs by year