Deductible vs Non-Deductible Business Expenses Under UAE Corporate Tax (Entertainment, Interest & Salaries)
Under Article 28 of Federal Decree-Law No. 47 of 2022, UAE Corporate Tax is levied on Net Taxable Income — not gross revenue. Every legitimate operating expense incurred wholly and exclusively for your business reduces your taxable profit at 9%. However, Articles 29 through 33 restrict deductions for client entertainment (50% cap), net interest expense (30% EBITDA cap), bribes, fines, and dividends.
Key Statutory Takeaways (2026)
Open Corporate Tax Calculator →- 100% Deductible: Staff salaries, MOHRE gratuity accruals, office rent/Ejari, trade license renewals, marketing, software, and vehicle fuel.
- 50% Deductible (Article 32): Client entertainment, meals, hospitality, hotel stays, and event tickets for customers or suppliers.
- 30% EBITDA Cap (Article 30): Net interest expenditure above AED 12,000,000 is capped at 30% of tax-adjusted EBITDA.
- 0% Non-Deductible (Article 33): Government fines (traffic/RTA/FTA penalties), non-approved charity donations, bribes, and shareholder dividends.
In This Guide (Quick Jump)
- 1. The "Wholly and Exclusively" General Rule (Article 28)
- 2. 100% Deductible Business Expenses in Dubai
- 3. The 50% Cap on Client Entertainment (Article 32)
- 4. Net Interest Deduction Cap (AED 12M / 30% EBITDA)
- 5. Completely Non-Deductible Expenses (Article 33)
- Statutory Comparison Table
- Frequently Asked Questions
1. The "Wholly and Exclusively" General Rule (Article 28)
Under Article 28(1) of the UAE Corporate Tax Law, an expenditure is deductible in the tax period in which it is incurred if it is not capital in nature and is incurred wholly and exclusively for the purposes of the Taxable Person's Business. If an expense has a dual business-and-personal purpose (such as a family SUV used 60% for business deliveries and 40% for personal weekend trips), only the identifiable business proportion (60%) is tax-deductible.
2. 100% Deductible Business Expenses in Dubai
Provided you retain valid tax invoices and payment proof, the following operating costs are 100% deductible against your gross revenue:
- Employee Payroll & Benefits: Salaries, housing allowances, medical insurance, annual flight tickets, employee visa & Emirates ID fees, and End of Service Gratuity (EOSB) payments.
- Commercial Rent & Utilities: Office/warehouse rent registered under Ejari, DEWA bills, Empower/Tabreed chiller fees, and telecoms.
- Fleet & Logistics Fuel: Commercial petrol and diesel expenses, Salik toll charges, and commercial vehicle maintenance.
- Marketing & Professional Fees: Google/Meta ads, agency retainers, accounting/audit fees, and trade license renewal costs.
Note that salaries paid to company owners, directors, and shareholders are only deductible to the extent they match arm's-length market rates under Article 36.
3. The 50% Cap on Client Entertainment (Article 32)
Under Article 32, expenditure incurred to entertain customers, shareholders, suppliers, or other business partners—including meals at Dubai restaurants, hotel accommodation, transport, admission to sporting/cultural events, and hospitality suites—is limited to a 50% deduction. The remaining 50% must be added back to your accounting profit when computing Taxable Income. (By contrast, internal staff team-building events or pantry refreshments for your own employees are generally 100% deductible.)
4. Net Interest Deduction Cap (AED 12M / 30% EBITDA)
Under Article 30 and Ministerial Decision No. 126 of 2023 (General Interest Deduction Limitation Rule), Net Interest Expenditure (interest paid minus interest earned) is 100% deductible up to AED 12,000,000. If your net interest expense exceeds AED 12,000,000 in a tax period, the deductible amount is capped at the higher of AED 12,000,000 or 30% of your tax-adjusted EBITDA. Any disallowed interest can be carried forward for up to 10 subsequent tax periods.
5. Completely Non-Deductible Expenses (Article 33)
You must add back 100% of the following items to your accounting profit before applying the 9% tax rate in our UAE Corporate Tax Calculator:
- Fines and Penalties: RTA speeding/parking fines, MOHRE fines, municipality penalties, and FTA tax penalties (compensation for private contract breach remains deductible).
- Donations to Non-Qualifying Charities: Grants or donations not made to a Qualifying Public Benefit Entity listed in Cabinet Decision No. 37 of 2023.
- Dividends & Profit Distributions: Dividends paid to shareholders.
- Corporate Tax & Recoverable VAT: UAE Corporate Tax itself and input VAT that you can recover on your VAT return.
Summary of Expense Deductibility Under UAE Corporate Tax (Articles 28–33)
| Expense Category | Deductible % | Statutory Rule / Condition |
|---|---|---|
| Staff Salaries, Visas, Rent, Marketing & Fuel | 100% | Article 28 — Wholly & exclusively for business |
| Owner / Director Remuneration (Connected Persons) | Up to 100% | Article 36 — Must pass Arm's Length market salary test |
| Client / Supplier Entertainment & Hospitality | 50% | Article 32 — 50% added back in tax computation |
| Net Interest Expense (Bank Loans / Sukuk) | 100% up to AED 12M | Article 30 — Above AED 12M capped at 30% EBITDA |
| Government Fines, Penalties & Non-Approved Donations | 0% | Article 33 — Strictly non-deductible |
Calculate Your Net Taxable Profit & 9% Tax Bill
Plug your adjusted net profit into our Corporate Tax Calculator to see your exact tax after the AED 375,000 exemption.