🔹 Scenario
- Company: XYZ Consulting LLC
- Financial year: 2024
- Accounting profit (per books): AED 400,000
This profit already includes some expenses that are NOT fully allowed for tax.
📄 Expenses in the Accounts
| Expense | Amount (AED) | Tax Treatment |
|---|---|---|
| Office rent | 80,000 | ✅ Allowed |
| Staff salaries | 120,000 | ✅ Allowed |
| Client entertainment | 30,000 | ❌ 50% disallowed |
| Traffic fines | 5,000 | ❌ 100% disallowed |
| Director’s personal travel | 15,000 | ❌ 100% disallowed |
🧮 Step 1: Identify Disallowed Portion
❌ Entertainment expense
- 50% of AED 30,000 = AED 15,000 disallowed
❌ Traffic fines
- 100% of AED 5,000 = AED 5,000 disallowed
❌ Personal travel
- 100% of AED 15,000 = AED 15,000 disallowed
👉 Total disallowed expenses = AED 35,000
🧮 Step 2: Calculate Taxable Income
| Description | Amount (AED) |
|---|---|
| Accounting profit | 400,000 |
| Add back disallowed expenses | +35,000 |
| Taxable income | 435,000 |
🧮 Step 3: Calculate Corporate Tax
| Portion | Rate | Tax |
|---|---|---|
| First AED 375,000 | 0% | 0 |
| Remaining AED 60,000 | 9% | 5,400 |
✅ Final Result
- Taxable income: AED 435,000
- Corporate tax payable: AED 5,400
🚫 Common Disallowed Expenses in UAE Corporate Tax
- Fines & penalties (traffic, municipality, visa fines)
- Personal expenses charged to company
- 50% of business entertainment (meals, gifts, events)
- Bribes or illegal payments
- Donations (unless to approved UAE entities)
💡 Pro Tip
Always keep proper documentation. If an expense looks personal or non-business, the FTA will likely disallow it during review.
