Deductible Expenses for Natural Persons Under UAE Corporate Tax

People costs: subcontractor and freelancer fees, staff salaries, visas, and medical insurance. These are usually the largest deduction for service businesses. Keep contracts, invoices from the subcontractors, and proof of payment — a bank transfer to a person with no contract looks like drawings, not a business cost.

Operating costs: trade licence and permit fees, software subscriptions, phone and internet (business share), office or co-working rent, utilities, and marketing spend. Marketing needs invoices from the platform or agency; 'AED 20,000 — advertising' with no supporting detail will not survive a query.

Cost of sales: materials, stock, and direct project costs for traders and makers. Deduct cost of goods sold — opening stock plus purchases minus closing stock — not raw purchases. The year-end stock count is a required ritual, not an optional one.

Few costs are purely business. The car drives to clients and to school; the phone takes business and personal calls; the apartment houses the family and the home office. The law allows the business share — apportioned on a reasonable basis and documented.

Reasonable bases: floor area for home office (one room of four, adjusted for actual use), mileage logs for vehicles, call/data analysis or a stated business-use percentage for phones applied consistently. Pick the basis that fits the cost and stick with it year to year.

Write the apportionment down: one paragraph per mixed cost, kept with the return workings. 'Car 70% business per mileage log, 14,000 of 20,000 km' is a complete defence. 'About half' is not. Consistency across years matters — a car that was 70% business last year and 95% this year needs an explanation.

Owner's drawings top the list. Taking AED 30,000 a month from the business for personal use is not a salary expense — it is your own money. Labelling drawings as 'management fees' to yourself does not make them deductible either.

Personal living costs: family groceries, school fees, personal travel, the personal share of everything. Fines and penalties — traffic fines, late-licence penalties — are never deductible anywhere in the tax system. Neither are bribes or illegal payments.

Undocumented spending is effectively non-deductible. The law puts the burden of proof on you; an expense you cannot evidence is an expense you cannot claim. When in doubt, get the receipt before you claim the deduction.

Buying a long-lived asset — a vehicle, machinery, a high-end computer setup — is capital expenditure. You do not deduct the full cost in the purchase year; you depreciate it over its useful life under the tax depreciation rules, claiming a slice each year.

Repairs that merely maintain an asset are generally deductible as revenue expenditure; improvements that enhance it are capital. Replacing a broken laptop screen is a repair; upgrading the whole studio's workstations is capital. The line follows what the spending achieved.

Keep an asset register from the first purchase: description, date, cost, business-use percentage, and depreciation claimed each year. When you sell the asset, the register computes the gain or loss. A register started late can be reconstructed, but it is never as convincing as one kept contemporaneously.

Entertainment and hospitality face specific restrictions — client dinners and events are not automatically fully deductible. Check the current FTA guidance and Ministerial Decisions on entertainment expenditure before claiming; when in doubt, claim conservatively and disclose the basis.

Interest on business borrowing is subject to the general interest-limitation framework in the law. A freelancer with a business loan should verify how much interest is deductible rather than assuming the full amount. Keep loan statements and trace the borrowing to business use.

Related-party costs — paying your spouse's company for 'services' — must be arm's length and genuinely for the business. Inflated related-party charges are a classic adjustment item. If the transaction would not happen at that price with a stranger, do not claim it at that price with family.