How Outsourcing Your Accounting to Young and Right Can Significantly Reduce Your Business Costs in Dubai
15/12/2025
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In the dynamic business landscape of Dubai, where innovation meets opportunity, managing corporate tax obligations is more crucial than ever. As the UAE Federal Corporate Tax regime continues to mature, now in its third year since implementation in June 2023, businesses in the UAE must navigate the nuances of what qualifies as deductible expenses for corporate tax to optimize tax positions. At Young & Right, a leading accounting and tax consultancy firm based in Dubai, we specialize in helping SMEs and multinational enterprises alike reduce their tax liability through compliant and strategic expense claims. Whether a tech startup in Dubai Internet City or a trading firm in Jebel Ali Free Zone, understanding UAE corporate tax deductible expenses, including deductible and non-deductible expenses, can significantly lower the effective tax rate from the standard 9 percent on profits exceeding AED 375,000.
Drawing from the latest corporate tax guidelines from the Federal Tax Authority as of November 2025, this guide is designed to empower businesses with actionable insights on understanding UAE corporate tax, the UAE corporate tax framework, and UAE’s corporate tax. By the end, a roadmap to streamline tax returns, maximize deductions, and boost the bottom line emerges. Let's get started on how to optimize your tax position while ensuring compliance with tax regulations.
At its heart, UAE Corporate Tax is levied on a taxable person's net profits, calculated as accounting income adjusted for tax purposes under the UAE tax law and UAE federal corporate tax law. The beauty of the tax system lies in its allowance for deductions: genuine business expenses that reduce gross profits before applying the 9 percent rate, providing a significant tax benefit. Not all costs qualify as tax deductible or deductible under UAE corporate tax. The golden rule, enshrined in Article 28 of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, is straightforward yet stringent: expenses must be incurred wholly and exclusively for business purposes, not of a capital nature, and incurred within the tax period.
This means wholly and exclusively for business excludes any personal benefit, such as a company car used for weekend getaways; only the business portion counts as legitimate business expenses. Capital expense refers to long-term investments like buying a building, handled via depreciation instead. Tax period alignment ensures deductions match the financial year, typically on an accruals basis, recognized when expenses are incurred, not paid, though cash-basis accounting is available for qualifying small businesses with revenue under AED 3 million. expenses incurred for the purpose of business operations are deductible only if they meet these criteria, ensuring businesses are taxed only on actual income
For Dubai-based firms, this framework aligns with international standards like OECD guidelines, promoting fairness while curbing abuse in the overall tax system. Anti-avoidance measures, such as transfer pricing for related-party transactions and thin capitalization rules, ensure deductions reflect arm's-length dealings, as outlined in the UAE corporate tax law. At Young & Right, clients have slashed tax liabilities by 20-30 percent simply by properly categorizing and documenting types of deductible expenses versus those that may not be deductible. The FTA's audits are thorough, so robust records are non-negotiable for tax compliance and compliance with UAE regulations.
To claim these eligible deductions, report them in the CT return via the EmaraTax portal, supported by financial statements prepared under IFRS. Now, break down the key categories of deductible expenses under the UAE, including expenses under the UAE federal tax system and expenses related to business.
UAE CT law embraces a wide range of expenses that are generally deductible, mirroring everyday business realities for businesses in the UAE. Below, detailed descriptions summarize the main types of expenses, complete with examples and notes on what is allowed as a deductible expense. These are drawn from FTA Cabinet Decisions and Ministerial guides, ensuring they are up-to-date for the latest corporate tax rules in 2025, focusing on corporate tax-deductible expenses and deductible for tax purposes.
Salaries, wages, bonuses, allowances, employer contributions to pensions or End-of-Service benefits, training or joining fees, and staff relocation—such as housing allowances for expatriates—fall under this category of expenses incurred for employee needs. These are fully deductible if arm's-length and documented, with expenses that are directly linked to business operations. For related parties, prove business purpose. Travel between sites, not home-to-work, qualifies as necessary expenses.
Rent for commercial space, utilities including electricity, water, and air conditioning, insurance, cleaning, security, and minor repairs to leased property qualify here as expenses under the UAE. Use proportional allocation for home offices, for example, 40 percent of rent if a dedicated business space exists. Improvements may be capitalized, but routine costs are deductible if they meet the wholly and exclusively for business test.
Advertising campaigns, website maintenance, digital marketing, legal or accountancy fees for business advice, subscriptions to industry journals, and bank charges are included in this category of tax deductions. Legal fees for contract negotiations are deductible; dispute resolution with suppliers qualifies. Capital-related fees, such as M&A advisory, go through depreciation, but advisory for ongoing operations is a deductible expense.
Raw materials, office stationery, postage or courier services, printing, and software licenses as revenue subscriptions like SaaS tools count as deductible expenses under the UAE. Deduct these via cost of goods sold. Provisions for slow-moving stock are allowed if backed by scientific or commercial rationale, such as inventory aging reports, helping businesses deduct expenses from their taxable income.
Fuel, insurance, repairs, leasing for business vehicles, and public transport for employees on duty are deductible. Add back private use, tracked via logs. Electric vehicles may qualify for enhanced incentives under green initiatives, making these expenses related to business transport generally deductible.
Business trips, including flights, hotels, and meals for employees or key management attending meetings or visiting distributors, are allowable. Maintain itineraries or proof of purpose. Home-to-client travel is deductible; personal vacations are not, distinguishing deductible and non-deductible expenses clearly.
Phone or internet bills for the business portion, cloud services, and minor hardware repairs qualify as IT-related tax deductions. Capital items are depreciated; revenue maintenance is deductible, ensuring only revenue expenses are immediately claimed.
Write-offs for irrecoverable debts and provisions for expected credit losses per IFRS 9 are included. These must be specific and evidence-based; they follow loan relationship rules, allowing businesses to offset tax losses against future income.
Rebates and volume discounts given to customers are deductible if accrued and linked to sales revenue, directly reducing taxable income of subsequent tax periods.
Under UAE Corporate Tax (CT) as of 2025, non-deductible expenses do not reduce taxable income, targeting capital investments, anti-avoidance, or non-qualifying costs to align relief with economic activity. Key categories include:
Capital outlays (e.g., machinery, intangibles) are not immediately deductible. Recover via IFRS-aligned depreciation/amortization over useful life, using straight-line or reducing balance methods (e.g., 20% straight-line for computers over 5 years).
Capitalized interest follows separate rules and may be limited.
Net interest capped at 30% of tax-adjusted EBITDA (full if under AED 12M safe harbor). Excess is non-deductible but carries forward up to 10 years.
Exemptions: Pre-2022 debts, infrastructure.
Qualifying Free Zone Persons (0% on exempt income) must segregate expenses; non-allocable costs to exempt activities are non-deductible against taxable income. 2025 update requires 50% ownership continuity for carry-forwards.
Use Net Operating Losses (indefinite carry-forward, up to 75% offset) and group relief (75% owned entities) to mitigate. Contrast with incentives like 100% R&D deductions for growth per Vision 2031. Consult experts for modeling, e.g., lessee depreciation claims. Rules evolve—verify current guidelines.
Spotting which costs you can deduct under UAE Corporate Tax (CT) rules can be tricky. Deductions must be purely for business needs—no personal perks allowed. Mistakes lead to audits or higher taxes. Here's a simple breakdown of common issues, with easy tips to fix them (based on 2025 UAE laws).
Things like private trips, family gifts, home commutes, or work clothes are not deductible. Why? They're mostly for you, not the business.
Buying big assets, like office setups or machines, can't be deducted all at once. Treat them as capital expenses—spread the deduction over years via depreciation.
Late tax filing fees, traffic tickets, or rule-breaking costs are non-deductible. It's about public good—they don't help make money.
Bribes, shady deals, or too much client fun (over 50% cap on hospitality like golf days) are banned. Staff team events? Fully okay if for morale.5. Other No-Gos
At Young & Right, we guide businesses through the UAE corporate tax framework, from identifying tax deductible items to avoiding non-deductible expenses in UAE corporate. Our experts ensure your interest expenses, employee costs, entertainment expenses, or provisions incurred for business purposes may be deductible as per the latest corporate tax, provided they are compliant with tax regulations. We help you leverage these expenses to ensure they result in tax minimization, turning compliance into a competitive edge.
Spotting Opportunities We analyze all expenses incurred for business purposes—from interest expenses and employee costs to entertainment and provisions—to determine what may be deductible under UAE corporate tax law. Our strategies ensure full substantiation with invoices, contracts, and apportionment rules, preventing FTA adjustments while maximizing relief and helping you result in tax minimization.
Risk Mitigation We flag and restructure non-deductible items like fines, personal expenses, or excessive entertainment to keep them compliant with tax regulations. Custom roadmaps for mainland and free zone entities preserve deductibility thresholds, cutting effective tax rates and ensuring alignment with applicable UAE tax laws.
Forward Planning We model deductible provisions for bad debts, warranties, or bonuses, ensuring they are incurred for business purposes and may be deductible when realized. Timing strategies under UAE CT rules defer or accelerate claims, enabling loss carry-forwards and expenses to ensure sustained tax minimization amid cash flow needs.
Cost Efficiency From salaries and gratuities to training or relocation, we classify employee costs to confirm they may be deductible while compliant with tax regulations. Our advisory optimizes EOSB provisions and exempt perks, reducing taxable income for startups to multinationals and turning HR spends into tax advantages.
Balanced Claims We apportion entertainment expenses under de minimis and business purpose tests to ensure portions incurred for business purposes may be deductible. FTA-ready documentation and policy frameworks help clients claim legitimately, avoid disallowances, and result in tax minimization without audit risks.
Debt Optimization For interest expenses, we apply EBITDA limits, thin capitalization rules, and related-party tests to maximize deductibility while staying compliant with tax regulations. Refinancing models and arm's-length benchmarks for JAFZA or ADGM firms unlock full relief, lowering effective rates under UAE corporate tax law.
Adaptive Compliance Quarterly reviews, FTA update tracking, and real-time expense coding keep deductions audit-ready amid changes like digital invoicing mandates. This expenses to ensure ongoing tax minimization, supports voluntary disclosures, and navigates clarifications seamlessly for long-term savings.
Mastering deductible expenses for corporate tax in the UAE transforms Dubai's ambitious enterprises. From employee perks to strategic R&D investments, these deductions—expenses under the UAE—are levers for growth, tax planning, and competitiveness. With FTA's evolving scrutiny and complex rules like GIDLR, DIY risks abound; instead, consult with tax professionals for peace of mind.
At Young & Right, the Dubai-based team of certified tax advisors tailors tax strategies to your sector, whether mainland, free zone, or multinational, ensuring every expense is deductible under UAE corporate tax and helping you reduce their tax liability effectively. Partner with us to maximize your tax deductions, offset tax losses over ten tax periods if needed, and achieve sustainable tax compliance in the UAE’s corporate tax system.
Optimize your business expenses under UAE corporate tax law and reduce your tax liability with expert guidance from Young & Right.
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