As UAE businesses adjust to the Corporate Tax regime, one common source of confusion—especially among startups and founders—is what qualifies as a deductible business expense. While many assume all business-related costs can be claimed to reduce taxable income, the truth is more nuanced.
Let’s break it down.
What Are Deductible Expenses?
Under UAE Corporate Tax law, only expenses that are wholly and exclusively incurred for the purposes of the business are allowed as deductions. These must be properly documented and not of a capital nature (unless depreciated or amortized).
Common deductible expenses include:
- Salaries and employee benefits
- Rent and utilities
- Office supplies and software subscriptions
- Marketing and advertising costs
- Professional services (legal, accounting, consultancy)
- Depreciation of fixed assets
- Interest on business loans (within regulatory limits)
- Staff entertainment expenses (e.g. team-building activities, company dinners)
- Client entertainment expenses (e.g. meals, hospitality, guest events) — 50% deductible
What Is Not Deductible?
Some expenses are specifically non-deductible, even if paid by the business. These include:
- Fines and penalties imposed by government authorities
- Donations (unless to approved entities)
- Personal expenses charged through the business
- Capital expenditures unless depreciated or amortized over time
- Unreasonable or excessive costs with no business justification
Grey Areas Startups Often Overlook
Founders sometimes mistakenly claim:
- AirPods, phones, or watches used personally
- Meals and coffee bills not tied to client meetings
- Travel costs without clear business purpose
- Expenses made before the business was legally formed
Such claims may lead to disallowed deductions or even penalties during audit.
Finzoryx Advice to Founders
- Keep clear records: Attach invoices and payment proofs to every transaction
- Segregate personal from business use: Even if using one bank account or card
- Avoid claiming vague expenses: Be able to justify each cost with purpose
- Amortize intangible costs: Like website development or license fees
- Ask before filing: One wrong deduction can trigger audit risk
Final Thoughts
Not every payment made by a business qualifies for tax relief. The key is clarity, compliance and confidence—all of which Finzoryx specializes in. We help UAE startups and founders maintain accurate financials, avoid costly mistakes, and stay fully aligned with Corporate Tax regulations.
Got questions about which of your expenses are deductible?
📩 Email us at connect@finzoryx.com
📞 Call or WhatsApp us at 0503978121