Definition

A Non-Deductible Expense is a cost that cannot be subtracted when calculating taxable income under UAE Corporate Tax law, even if it is recorded in the financial statements.

Key points

• Common examples: administrative penalties, recoverable VAT, bribes, and dividends.
• Non-deductible expenses increase taxable income.
• Businesses must adjust for these items in their corporate tax return.

Practical example

A company pays an FTA penalty of AED 10,000 for late filing. This penalty is not deductible and must be added back when calculating taxable income.

Why it matters

Identifying non-deductible expenses ensures businesses calculate corporate tax correctly and avoid disputes with the FTA.