Entertainment costs — such as business dinners, staff parties, or hospitality — often cause confusion for founders and finance managers. Are they deductible for Corporate Tax purposes?
The UAE Corporate Tax Law and FTA guidance provide a clear answer: it depends on who the entertainment is for.
Employee Entertainment – Fully Deductible
According to the FTA’s Determination of Taxable Income Guide Section (4.5.10.1), entertainment that relates to employees is considered a normal business expense and is fully deductible.
Examples:
- Staff meals during overtime or business trips.
- Annual staff parties or team-building events.
- Employee recognition dinners or internal gatherings.
Since these expenses directly support staff welfare and operations, they are treated as 100% deductible.
Client & Business Partner Entertainment – 50% Deductible
Under Article 32 of the UAE Corporate Tax Law, only 50% of entertainment costs incurred for customers, suppliers, shareholders, or other business partners can be deducted.
Examples:
- Client lunches and dinners.
- Tickets to events offered to suppliers or partners.
- Hospitality during meetings outside the office.
So, if you spend AED 5,000 on a client dinner, AED 2,500 is deductible and AED 2,500 is disallowed for Corporate Tax purposes.
Entertainment That is Not Deductible
The FTA also clarifies that some spending is not deductible at all. For example:
- Costs of entertaining shareholders’ family members.
- Extravagant or personal expenses disguised as “business hospitality.”
Practical Example
- Team dinner for employees = AED 5,000 → 100% deductible.
- Dinner with clients = AED 5,000 → AED 2,500 deductible / AED 2,500 disallowed.
- Coffee and snacks during an office meeting = fully deductible (considered incidental, not entertainment).
Key Takeaway
- Employee entertainment → Fully deductible.
- Client/partner entertainment → 50% deductible (Article 32).
- Shareholder family entertainment → Not deductible.
- Keep clear records (who attended, purpose, and receipts) in case of FTA review.
Clarity – Compliance – Confidence
At Finzoryx, we emphasise getting these basics right:
- Clarity on which entertainment expenses are 100% deductible and which are restricted to 50%.
- Compliance with Article 32 of the Corporate Tax Law and FTA guidance on taxable income.
- Confidence that your expense claims will stand up in case of audit.
Reach out at connect@finzoryx.com or call 0503978121 if you want us to review your expense policies and ensure your company stays fully compliant.