This guide walks you through the practical steps in Wafeq to set up corporate tax, starting from configuring the default tax accounts up to exporting the report.
What you'll find in this guide:
- Setting the Default Tax Classification in the Chart of Accounts
- Applying the Tax Classification to Transactions
- Overriding the Tax Classification Within a Transaction
- Corporate Tax in Journal Entries
- Corporate Tax Report
To understand why Wafeq simplifies corporate tax compliance and why it differs from other accounting software, refer to
Setting the default tax classification in the chart of accounts
Every accounting transaction you record starts with selecting a specific account from the chart of accounts. Since the tax treatment varies based on the nature of each account, Wafeq allows you to set a default tax classification for every revenue or expense account. This classification is then automatically applied whenever the account is used in a transaction.
For revenue accounts
To set the default tax classification for a revenue account:
Click on "For Accountant" from the main menu, then select "Chart of Accounts".
Within the chart of accounts, go to the "Revenue" section under the "Account Name" column, where you’ll find all revenue accounts listed.
Then, click on the "View Account Details" button next to the revenue account you want to configure for corporate tax.
View revenue account details
Go to the section labeled "Default Corporate Tax Treatment", then choose whether the account is:
Non-taxable (Exempt)
Taxable
After selecting the appropriate classification, click "Save".
All future transactions linked to this account will automatically adopt the selected tax treatment.
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If no corporate tax setting is defined for a revenue account, the default treatment will be: Taxable.
Revenue tax classification
For expense accounts:
To set the default corporate tax classification for an expense account:
Click on "For Accountant" from the main menu, then select "Chart of Accounts."
Within the chart, go to the "Expenses" section under the "Account Name" column, where all expense accounts are listed.
Click the "View Account Details" button next to the expense account you want to configure for corporate tax.
View expense account details
Go to the section labeled "Default Corporate Tax Treatment", then choose whether the account is:
Fully deductible
50% deductible
Non-deductible
After selecting the appropriate classification, click "Save".
All future transactions linked to this account will automatically adopt the selected tax treatment.
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If no corporate tax setting is configured for an expense account, the default treatment is: Fully deductible.
Expense tax classification
Expense tax classification
Applying the tax classification to transactions
After setting the default corporate tax classification for each account in the chart of accounts, Wafeq automatically applies this classification whenever the account is used in any transaction, whether it's a sales invoice, purchase invoice, receipt, payment, or even a journal entry.
👇 In the example shown in the image:
The user navigates to "Invoices" under "Sales" in the main menu.
- Creates a new invoice.
- Adds a new line to the invoice, selects the account "Other Sales" (as an example), completes the data, and saves it.
- Then navigates to the invoice list and selects the "Sheet View" option.
- The tax for this invoice appears automatically in the "Corporate Tax" column as "Taxable.".
Automatic tax classification for an invoice
Overriding the tax classification within a transaction
While recording transactions, you may encounter exceptional cases, such as a taxable line item under an exempt account, or vice versa.
In Wafeq, you can override the tax classification, either at the document level or per line item, without modifying the chart of accounts.
👇 In the example shown:
The user creates a sales invoice with one line item linked to the “Other Sales” account, which is tax-applicable by default.
However, due to the nature of the transaction, the user wants to mark this line item as “Non-taxable (Exempt)” without changing the account.
- The user goes to “Invoices” under the “Sales” section in the main menu.
- selects “Sheet View”.
- finds the tax field under the “Corporate Tax” column showing “Taxable”.
- clicks it and selects “Non-taxable (Exempt)” from the dropdown.
- So, the tax status of the line item is updated, while keeping it under the same account in the chart.
Overriding the default tax classification for an invoice
Corporate tax in journal entries
The way Corporate Tax is applied in journal entries is slightly different from other revenue and expense documents. The tax treatment is set for the entry line that relates to income or expense, directly within the journal entry as it's being created, giving you greater control.
Click on "Accountant" in the main menu, then select "Manual Entries", and click the "Add" button to create a new entry.
Adding a new manual entry
Then select the account and enter all the journal entry details.
For the side of the entry subject to Corporate Tax, choose the appropriate tax classification from the dropdown under the “Corporate Tax” field:
For revenue: select either "Taxable" or "Exempt".
For expenses: select one of "Fully deductible", "50% deductible", or "Non-deductible".
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You can only assign a Corporate Tax classification if the selected account falls under Revenue or Expenses.
Journal entry tax classification
Corporate tax report
To access the report screen, click on "Reports" from the main menu, then select "Corporate Tax - Taxable Income" under the "Tax Reports" section.
Accessing the corporate tax report
- You can control the reporting period by clicking on the date range at the top of the screen and selecting your preferred period from the dropdown menu.
- You can also choose how to display the report — either as a yearly summary or with monthly breakdowns — by clicking the dropdown menu next to "View by" at the top of the report.
Setting the reporting period and view mode for the corporate tax report
After setting the time period and display format, the Corporate Tax Report shows:
Your "net accounting profit", as reported in the income statement,
Then deducts "exempt income",
Adds "non-deductible expenses", whether fully or partially,
And finally calculates the "taxable income", which is the actual base used to compute corporate tax, not the tax amount itself.
You can export the Corporate Tax Report by clicking the "Export" button inside the report. Then, select your preferred format (Excel or PDF).
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You can also choose to export the report in Arabic, in either format, even if your system language is originally set to English.
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