Which expenses are not deductible for UAE Corporate Tax: the law explained

Q: Which expenses are not deductible for UAE Corporate Tax?

Article 33 of the Corporate Tax Law disallows: donations, grants or gifts to an entity that is not a Qualifying Public Benefit Entity; fines and penalties (other than compensation for damages or breach of contract); bribes and other illicit payments; dividends and other profit distributions to owners; amounts a natural person or partner withdraws from the business; Corporate Tax itself; recoverable input VAT; tax on income paid outside the UAE; and other expenditure the Cabinet specifies. Two more limits: only 50% of entertainment expenditure for customers, shareholders, suppliers and other business partners is deductible (Article 32), and net interest expenditure is limited under the general interest deduction limitation rule (Article 30, Ministerial Decision No. 126 of 2023).

Which expenses are not deductible for UAE Corporate Tax?

Short answer

Article 33 of the Corporate Tax Law disallows: donations, grants or gifts to an entity that is not a Qualifying Public Benefit Entity; fines and penalties (other than compensation for damages or breach of contract); bribes and other illicit payments; dividends and other profit distributions to owners; amounts a natural person or partner withdraws from the business; Corporate Tax itself; recoverable input VAT; tax on income paid outside the UAE; and other expenditure the Cabinet specifies.

Two more limits: only 50% of entertainment expenditure for customers, shareholders, suppliers and other business partners is deductible (Article 32), and net interest expenditure is limited under the general interest deduction limitation rule (Article 30, Ministerial Decision No. 126 of 2023).

Checked against the official texts below. The law is the authority; this is not tax advice.

What the law says

Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Businesses, Article 33

Article 33 – Non-deductible Expenditure

No deduction is allowed for:

Donations, grants or gifts made to an entity that is not a Qualifying Public Benefit Entity.
Fines and penalties, other than amounts awarded as compensation for damages or breach of contract.
Bribes or other illicit payments.
Dividends, profit distributions or benefits of a similar nature paid to an owner of the Taxable Person.
Amounts withdrawn from the Business by a natural person who is a Taxable Person under paragraph (c) of Clause 3 of Article 11 of this Decree-Law or a partner in an Unincorporated Partnership.
Corporate Tax imposed on a Taxable Person under this Decree-Law.
Input Value Added Tax incurred by a Taxable Person that is recoverable under Federal Decree-Law No. (8) of 2017 referred to in the preamble and what replaces it.
Tax on income imposed on the Taxable Person outside the State.
Such other expenditure as specified in a decision issued by the Cabinet at the suggestion of the Minister.

Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Businesses, Article 32

Article 32 – Entertainment Expenditure

Subject to Article 28 of this Decree-Law, a Taxable Person shall be allowed to deduct 50% (fifty percent) of any entertainment, amusement, or recreation expenditure incurred during a Tax Period.
Clause 1 of this Article applies to any expenditure incurred for the purposes of receiving and entertaining the Taxable Person's customers, shareholders, suppliers or other business partners, including, but not limited to, expenditure in connection with any of the following:
a. Meals.
b. Accommodation.
c. Transportation.
d. Admission fees.
e. Facilities and equipment used in connection with such entertainment, amusement or recreation.
f. Such other expenditure as specified by the Minister.

Decisions and FTA guidance on this

Use the whole library inside ChatGPT or Claude, with the current text of every law: connect it.