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VAT

Why don’t VAT return sales match Corporate Tax revenue? And how do you reconcile them?

لماذا لا يتطابق رقم مبيعات ضريبة القيمة المضافة مع إيرادات ضريبة الشركات؟ وكيف تُعدّ المطابقة؟

A difference between total sales on your VAT returns and revenue in your financial statements and Corporate Tax return is often expected, because each figure is built on a different basis. A VAT return reports the value of supplies, net of VAT, for each tax period by date of supply, split between standard-rated, zero-rated, exempt and reverse-charge supplies. Corporate Tax starts from the accounting income in the financial statements and then applies the adjustments set out in the law. Differences usually come from timing, mismatched periods, deemed supplies, items that are not supplies, and credit notes. Good practice is a one-page reconciliation that explains each difference. For organised records, see EQRAR’s bookkeeping services.

The short answer: two correct figures on two different bases

The sales figure on your VAT return and the revenue figure in your financial statements are not two versions of the same number. Under Article 64 of the Executive Regulation, a VAT return covers the value of taxable supplies and the output tax charged on them, zero-rated supplies, exempt supplies, and supplies subject to the reverse charge. These values are entered net of VAT, as the Federal Tax Authority’s return-filing guide explains.

Corporate Tax works differently. Article 20 of the Corporate Tax Law provides that taxable income is determined on the basis of financial statements prepared under accounting standards accepted in the UAE, and that it is the accounting income for the period adjusted for the items the law specifies. So the useful question is not “are the two figures equal?” but “can I explain the difference, line by line?”

Why the two figures differ: nine common reasons

1. Date of supply vs revenue recognition

Article 25 of the VAT Law sets the date of supply as the earliest of several events, including receipt of payment or issue of the tax invoice. For periodic supplies, Article 26 sets it as the earliest of the tax invoice date, the payment due date, the date payment is received, or one year after the supply. Revenue, by contrast, is recognised under accounting standards and may fall in a different period. An advance payment, for example, may be reported on a VAT return before it appears as revenue in the financial statements.

2. Different periods

VAT returns are filed for tax periods, while the Corporate Tax return covers the Corporate Tax period, which usually follows the financial year. If the period boundaries do not line up, the total of your VAT returns will not equal the year’s revenue, even when every figure is correct.

3. Exempt supplies

Exempt supplies are reported on the return as a separate line, with no VAT charged. Article 46 of the VAT Law lists categories including specified financial services, residential buildings in certain cases, bare land and local passenger transport. If you compare revenue with taxable supplies only, the difference will look larger than it really is.

4. Zero-rated supplies

Zero-rated supplies, such as exports outside the Implementing States and international transport under Article 45, remain taxable supplies and are reported on the return at their value, even though the VAT charged is zero. They must be included in the reconciliation.

5. Deemed supplies

Article 11 treats certain actions as supplies, such as business assets provided without consideration in specified cases, assets put to non-business use where input tax was recovered, or assets held when registration is cancelled, subject to the exceptions in Article 12. A deemed supply may appear on the return with no matching revenue in the financial statements.

6. Reverse charge on imports

Under Article 48, a business importing for its business is treated as making a taxable supply to itself. Values linked to imports may therefore appear on the return even though they are not sales and have no matching revenue in the books.

7. Items that are not supplies

Article 7 sets out cases that are not treated as a supply, including the transfer of all or an independent part of a business to a taxable person who continues it. The financial statements may also include income that is not consideration for a supply, such as dividends received or foreign-exchange revaluation gains, while items such as compensation need to be analysed case by case. Interest on a loan or credit is different: it is generally consideration for a financial service, which may be exempt under Article 42 of the Executive Regulation, so it belongs with exempt supplies rather than with items that are not supplies. These items need to be analysed case by case before they are classified.

8. Credit notes and adjustments

Tax credit notes, discounts and returns may be recorded in a different period from the original invoice, either on the return or in the books. Track them by number and date in the reconciliation.

9. Exchange-rate and rounding differences

AED values may differ between the return and the books because of the exchange rate applied in each, or rounding in accounting software. These differences are usually small, but grouping them in one documented line keeps the reconciliation clear.

A one-page reconciliation: bridging revenue to your VAT returns

The articles this guide relies on do not prescribe a specific format for this reconciliation, but it is good practice that helps you explain your figures. It can be built on one page as follows (illustrative structure, no figures):

Line (illustrative example) Effect Supporting document
Revenue in the financial statements for the year Starting point Financial statements / trial balance
± Timing differences (advance payments, invoices before or after delivery) Add or deduct Tax invoices and statements
± Period-boundary differences between VAT returns and the financial year Add or deduct List of returns filed
− Income items that are not supplies Deduct Income account analysis
+ Deemed supplies Add Asset register and supporting entries
+ Reverse-charge values on imports Add Import documents
± Credit notes and adjustments Add or deduct Tax credit notes
± Exchange-rate and rounding differences Add or deduct Exchange rates applied
= Total supplies on the VAT returns (standard-rated + zero-rated + exempt + reverse charge) Result VAT returns
Unexplained difference Should be close to zero —

Use VAT-exclusive values throughout. Before you start, make sure your bank balances are reconciled; see our bank reconciliation guide, which gives you a reliable base before reconciling returns. A regular month-end close also makes this reconciliation easier each period.

When do you need a deeper review?

  • An unexplained difference remains after applying every line of the bridge.
  • The same differences recur across several periods without a known cause.
  • There are unusual transactions, such as transferring part of the business, a large import or supplies made without consideration.
  • There are many credit notes that do not link clearly to their original invoices.

In these cases it can help to review the classification with a specialist, within EQRAR’s VAT services or Corporate Tax services.

Common reconciliation mistakes

  • Comparing only standard-rated supplies with revenue, leaving out zero-rated and exempt supplies.
  • Using VAT-inclusive values instead of net values.
  • Adding up returns that do not cover the same period as the financial year.
  • Ignoring deemed supplies and reverse charge because they do not appear as sales in the books.
  • Leaving differences without supporting documents, or postponing the reconciliation to year-end. To see what you need before the Corporate Tax return, read our Corporate Tax preparation guide.

Frequently asked questions

Is it normal for VAT return sales not to match revenue in the financial statements?

Yes, in many cases a difference is expected, because the two figures are built on different bases. A VAT return reports the value of supplies for each tax period by date of supply, while Corporate Tax starts from the accounting income in the financial statements. What matters is that the difference is explained, with a reconciliation that ties each item to its supporting documents.

What are the main reasons VAT sales differ from Corporate Tax revenue?

The main reasons include the date of supply compared with when revenue is recognised in the accounts, VAT tax periods that do not align with the financial year, exempt and zero-rated supplies, deemed supplies, reverse charge on imports, items that are not supplies for VAT purposes, credit notes and adjustments, and exchange-rate and rounding differences. A structured reconciliation shows the effect of each one.

Do exempt and zero-rated supplies appear on the VAT return?

Yes. Article 64 of the Executive Regulation provides that the tax return must allow the value of zero-rated supplies and the value of exempt supplies to be reported, alongside taxable supplies and the output tax charged on them. These lines should therefore be compared with the corresponding revenue in your books when you prepare the reconciliation, not only the standard-rated supplies.

Is a deemed supply recorded as revenue in the financial statements?

Not necessarily. A deemed supply is a situation the law treats as a supply for VAT purposes, such as business assets provided without consideration in specified cases, and it may have no matching revenue in the financial statements. It therefore usually appears as a separate line in the reconciliation, documented to show its nature, value and the period in which it was reported.

Is a reconciliation between VAT returns and the financial statements legally required?

The articles this guide relies on do not prescribe a specific reconciliation format. However, the law requires records of supplies, tax invoices and credit notes to be kept, and Corporate Tax is based on financial statements prepared under accounting standards accepted in the UAE. A reconciliation is therefore good practice that helps you explain your figures when needed.

When is the VAT return due for a tax period ending on 30 September 2026?

Under Article 64 of the Executive Regulation, the return must be received by the Federal Tax Authority no later than the 28th day following the end of the tax period, or by such other date as the Authority directs, and payable tax must be settled by the same date. For a period ending on 30 September 2026, that date is 28 October 2026, unless the Authority directs otherwise.

How often should this reconciliation be prepared?

Good practice is to prepare the reconciliation with each VAT return, then a full annual reconciliation at financial year-end, before the Corporate Tax return is prepared. Reconciling regularly surfaces differences early, while they are still easy to trace, rather than trying to explain differences that have built up over several periods at the end of the year.

Conclusion

A difference between VAT return sales and Corporate Tax revenue does not necessarily mean something is wrong; what matters is that you can explain each difference and support it with a document. A one-page reconciliation prepared with each return and at year-end keeps your figures clear and easier to follow.

Request a scoped review reconciling your returns with your books — or message us on WhatsApp at +971 55 738 5159.

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This article is for general information and is not tax advice. Check your tax period and obligations in your Federal Tax Authority account, or consult a specialist.

+971 55 738 5159info@eqraraccounting.com
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