What expenses are deductible for corporate tax UAE businesses can claim?

Article 28 of the Corporate Tax Law allows a deduction for expenditure incurred wholly and exclusively for the purposes of the taxable person's business, provided it is not capital expenditure. Where a cost serves both business and personal purposes, the business share can be deducted if it can be identified.

So rent for a warehouse in Jebel Ali is deductible. A villa lease in the owner's name, used for family, is not. A car used 70% for client visits and 30% privately may support a 70% deduction if mileage records back it up.

For most trading and service companies, the bulk of the profit and loss account passes the test without adjustment. The point is to have a tax invoice or receipt, a payment record and a clear business reason for each item.

• Salaries, allowances, visa and Emirates ID costs for staff
• Office and warehouse rent, DEWA, SEWA or ADDC utilities
• Trade licence renewals and free zone fees
• Marketing, software subscriptions and professional fees
• Bank charges and, below the AED 12 million de minimis, interest
• Staff medical insurance and training costs

Article 32 limits the deduction for entertainment, amusement and recreation of customers, shareholders, suppliers and other business partners to 50%. Staff events are treated differently from client hospitality, so post them to separate accounts.

Worked example: an Abu Dhabi engineering consultancy spends AED 48,000 on client lunches and a desert event for clients, and AED 22,000 on its staff Eid celebration. Of the client spend, AED 24,000 is deductible and AED 24,000 is added back. The staff celebration is generally deductible as a staff cost, provided it is genuinely for employees.

Interest on a business loan is deductible, but net interest expenditure above 30% of adjusted EBITDA is restricted, and that restriction only bites once net interest exceeds AED 12 million in the period. Disallowed interest can be carried forward for up to ten tax periods.

Payments to connected persons, which include owners, directors and their relatives, are deductible only to the extent they reflect market value. A family LLC paying the founder's son AED 40,000 monthly as a junior marketing executive should expect questions if the market rate is AED 12,000.

Buying a delivery van, fitting out a shop in City Walk or acquiring software you will use for years are capital items. They are not deducted in full when paid. Repairs that restore an asset are generally revenue; improvements that extend it are generally capital.

The line is not always obvious. A AED 90,000 shop refit might be part repair, part improvement. Keep the contractor's breakdown, because the split drives the deduction.

Before the books close, spend an hour on the accounts most likely to hide problems. Look at general expenses and sundry accounts for items that belong elsewhere. Check repairs for anything over, say, AED 20,000 that might be capital. Read through the owner's expense claims and the company card statement for personal items.

Then check paperwork. Supplier bills without a tax invoice, foreign subscriptions paid by card without a receipt, and cash payments to contractors without a signed invoice are the deductions most often challenged. Chasing a missing document in December is far easier than in September of the following year.

Deductions disappear when the document behind them is missing. HelloBooks' AI agent captures bills and receipts from photos, email or WhatsApp-forwarded images, reads Arabic and English text, and attaches each document to its ledger entry. It suggests separate accounts for client entertainment and staff entertainment so the 50% rule is easy to apply.

Ask 'show me client entertainment this year' and you get the list with attachments. Your accountant reviews capital-versus-revenue calls before the computation is finalised. Firms that want their own AI categorisation rules, for example splitting vehicle costs by percentage, can request them through hello@hellobooks.ai.