Direct Answer
To reconcile UAE VAT, ensure the total taxable supplies reported in Box 1 of Form 201 align with the total inward credits in your AED bank statements, adjusted for non-taxable receipts (like capital injections) and timing differences (accrual accounting).
Why the FTA Checks Bank Statements
The Federal Tax Authority (FTA) routinely requests bank statements during VAT audits to verify if a business is under-reporting revenue. If your bank statement shows 1,000,000 AED in credits, but your VAT return only declares 600,000 AED in standard-rated supplies, you must have documentation explaining the 400,000 AED variance.
Common Legitimate Variances
- Zero-Rated & Exempt Supplies: Exports (Box 4) or exempt financial services (Box 8) that generate cash but carry 0% VAT.
- Capital Injections: The owner transferring personal funds into the business.
- Inter-company Transfers: Moving money between two corporate accounts belonging to the same entity.
Best Practice
Maintain a monthly reconciliation spreadsheet. Start with Total Bank Credits, subtract Out of Scope / Exempt / Zero-Rated / Capital Transfers, and the result should mathematically equal your Total Taxable Supplies (Standard Rated) + 5% VAT collected.