What expenses are allowed for Corporate Tax deduction?
Generally allowed expenses include costs incurred wholly and exclusively for business purposes, such as employee salaries, rent, utilities, and operational expenses. However, certain expenses like entertainment (50% disallowed), depreciation, and excessive interest may be restricted.
UAE Corporate Tax allows deduction of expenses incurred wholly and exclusively for business purposes:
Fully Deductible Expenses
- Employee salaries and benefits
- Rent and utilities
- Professional services fees
- Insurance premiums
- Marketing and advertising costs
- Office supplies and equipment
- Training and development expenses
Partially Restricted Expenses
- Entertainment expenses: 50% disallowed
- Interest expenses: Subject to thin capitalization rules
- Related party transactions: Must be at arm's length
Non-Deductible Expenses
- Capital expenditure (subject to depreciation)
- Personal expenses of owners/directors
- Penalties and fines
- Charitable donations (except to approved entities)
- Provisions for doubtful debts (unless specific)
Special Rules
- Depreciation calculated per UAE Corporate Tax law
- Transfer pricing documentation required for related parties
- Substance requirements for certain deductions
