UAE Corporate Tax Deductions: What Can Your Business Claim? (2025 Guide)

As a leading Dubai and UAE tax, bookkeeping, and company formation expert, One Desk Solution brings you an essential, SEO-optimized guide to corporate tax deductions in the UAE. Whether you're an SME or a multinational, knowing exactly what expenses you can and cannot claim against your taxable income is crucial for compliance, optimization, and peace of mind.

The UAE's corporate tax, introduced for financial years starting on or after June 1, 2023, is a transformative move for businesses. The tax rate is 9% on taxable profits over AED375,000, with reliefs for small businesses and qualifying free zones. Effective tax planning hinges on understanding which expenditures are deductible against your taxable income.

Table of Contents

• Introduction to UAE Corporate Tax Deductions
• General Principles: What Makes an Expense Deductible?
• Comprehensive List of Deductible Expenses
• Partial Deductions & Deduction Limits
• Non-Deductible Expenses: What You Can't Claim
• Tax Reliefs, Credits & Incentives
• Required Documentation Checklist
• Common Mistakes in Claiming Deductions
• Conclusion: Why Use One Desk Solution
• Frequently Asked Questions (FAQ)

1. Introduction to UAE Corporate Tax Deductions

The UAE corporate tax regime represents a significant shift in the country's business landscape. While the rates are competitive globally, understanding the nuances of deductible expenses can make a substantial difference to your tax liability. This guide covers all you need to know about claiming expenses under the UAE corporate tax law as of 2025.

2. General Principles: What Makes an Expense Deductible?

To be deductible against your corporate taxable income, expenses must meet these key criteria:

• Wholly & Exclusively for Business: Expenses must be directly incurred for the sole purpose of generating taxable business income.
• Not Capital in Nature: Routine business costs are deductible; capital expenditures (e.g., acquiring an asset) are not—though these may be deductible as depreciation over time.
• Properly Documented: Expenses must be verifiable and substantiated by receipts, contracts, or similar evidence.
• Not Personal or Extravagant: Only the business-related portion of mixed-use expenses can be considered.

3. Comprehensive List of Deductible Expenses

A. Employee-Related Expenses

Expense Type	Example/Details	Deductibility
Salaries & Wages	All forms of employee pay	Fully deductible
Employee Benefits	Health insurance, end-of-service	Fully deductible
Training & Development	Job-related upskilling or courses	Fully deductible
Staff Welfare	Team outings with business benefit	Subject to entertainment limits

B. Office and Operational Expenses

Expense	Details	Deductibility
Rent	Office/warehouse leases	Fully deductible
Utilities	Electricity, water, internet	Fully deductible
Office Supplies	Stationery, consumables	Fully deductible
Repairs & Maintenance	To business property/equipment	Fully deductible

C. Professional & Legal Costs

Expense	Details	Deductibility
Audit Fees	Annual audits	Fully deductible
Legal Fees	Contract/dispute resolution	Fully deductible
Advisory & Consulting Fees	Tax, accounting, strategy	Fully deductible

D. Marketing & Advertising

Expense	Example/Details	Deductibility
Advertising Campaigns	Digital, print, TV ads	Fully deductible
Sponsorship & Events	If directly related to business	Fully deductible

E. Depreciation & Amortization

Most capital assets (machinery, buildings) are not immediately deductible, but can be claimed over several years through depreciation/amortization allowances, as detailed in the UAE Ministry of Finance's recent guidance.

F. Interest and Finance Charges

Interest on borrowing used for business (loans, credit facilities, financial leases, Islamic finance) is deductible, subject to limits. The UAE restricts excessive interest deductions to prevent abuse.

G. Specific Allowances & Group Relief

• Bad Debts: Written-off debts shown as uncollectible may be deductible.
• Loss Relief & Group Transfers: Tax loss carryforwards and asset transfers within qualifying groups are subject to specific conditions.

4. Partial Deductions & Deduction Limits

Expense	Deductible %	Notes
Interest Expense	Greater of AED12M or 30% of EBITDA	Applies to net interest paid; excess can be carried forward
Entertainment (Meals, events)	50%	Strict record-keeping required per Article 32
Capital Asset Depreciation	Varies	As per tax law/class of asset & latest guidance

5. Non-Deductible Expenses: What You Can't Claim

Not all expenses that are paid by the business are tax-deductible under UAE law. Common non-deductible costs include:

• Personal and Non-business Expenses (even when paid via business account)
• Expenses for Exempt or Non-Taxable Income (e.g., income generated in a qualifying free zone is exempt, so related costs aren't deductible)
• Fines & Penalties, except indemnity payments or breach-of-contract damages directly related to business
• Excessive or Luxurious Entertainment
• Dividends Paid and Capital Withdrawals (distribution of profit isn't deductible)
• Certain Donations and Gifts, unless directly related to business promotion or approved public benefit
• Losses Unrelated to Business (e.g., losses from non-core activities)

6. Tax Reliefs, Credits & Incentives

Relief Type	Description	Criteria
Small Business Relief	Businesses w/ revenue < AED3M (tax period ending before Dec 2026) can elect 0% CT	Cannot be a QFZP or part of MNE Group, must be resident
Foreign Tax Credit	Foreign income tax paid can be credited against UAE CT liability	Proof of foreign tax must be presented
Intra-group Asset Transfers	Tax-neutral, if shareholding and other qualifying criteria met	75% common ownership, same financial year/accounting
Loss Carryforward	Taxable loss in one period can offset future profits	Up to 75% of profits in each subsequent period

7. Required Documentation Checklist

Proper documentation is vital for claiming deductions and surviving FTA audits. Prepare:

Document Type	Examples/Details
General Ledger	Full breakdown of expenses
Invoices & Contracts	For all major purchases and services
Bank Statements	Business accounts showing payment/receipts
Payroll Records	Salary slips, contracts, benefits evidence
Loan Agreements	Where interest deduction is claimed
Depreciation Schedules	Fixed asset registers, calculations, and policies
Proof of Payment	Receipts, cleared cheques, remittance advices

8. Common Mistakes in Claiming Deductions

• Claiming personal/non-business expenses
• Ignoring deduction limits on interest or entertainment
• Poor documentation
• Claiming expenses related to exempt income (especially free zone companies)
• Failure to pro-rate mixed-use expenses
• Not staying updated with new Ministerial Decisions impacting deductions (e.g., depreciation of investment property)
• Delaying annual audits and transfer pricing compliance (if transacting with related parties)

Conclusion: Why Use One Desk Solution

For hassle-free tax compliance and to maximize legitimate deductions:

• One Desk Solution is a top expert in UAE corporate tax law, VAT, and accounting.
• We help identify and document all deductible expenses, ensure compliance with the latest regulations, and optimize your tax position.
• Our advisory and bookkeeping services minimize audit risk while maximizing legitimate tax savings.

Frequently Asked Questions (FAQ)

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