Definition

A Deductible Expense is a cost that a UAE business can subtract from its accounting profit when calculating taxable income for Corporate Tax purposes. Deductible expenses must be wholly and exclusively incurred for the purpose of generating taxable business income.

Key points

• Examples: staff salaries, rent, utilities, depreciation, and marketing expenses.
• Certain expenses are partially deductible (e.g., entertainment costs).
• Some expenses are non-deductible (e.g., fines, bribes, dividends).
• Businesses must maintain proper records and receipts.

Practical example

A consultancy spends AED 200,000 on office rent. This amount is deductible and reduces taxable income, lowering the corporate tax payable.

Why it matters

Understanding deductible expenses helps businesses reduce taxable profits legally and avoid penalties for incorrect claims.