Introduction

Under the UAE Corporate Tax regime, businesses can exclude certain types of income from taxation and deduct qualifying expenses to reduce taxable income. Knowing what qualifies as exempt income and deductible expenses is key to tax planning and compliance.

What is Exempt Income?

Certain categories of income are not subject to tax:

• Dividends received from UAE or foreign companies (subject to participation exemption)
• Capital gains on disposal of shares (if holding >12 months and ≥5% interest)
• Foreign branch income (if election is made under Article 24)
• Income of Qualifying Free Zone Persons (0% rate on qualifying income)

Exempt income must still be reported in the tax return.

What Expenses are Deductible?

To calculate taxable income, businesses can deduct:

• Staff salaries and bonuses
• Rent and utilities
• Marketing and operating expenses
• Interest expense (limited to 30% of EBITDA if exceeding AED 12M)
• Depreciation and amortization
• Bad debts written off

Non-Deductible Expenses

Some expenses are expressly disallowed:

• Fines and penalties
• Bribes or illegal payments
• Dividends paid
• Corporate tax expense
• Donations to unapproved entities
• Excessive entertainment (limits apply)

Final Thoughts

Understanding what income is exempt and which costs are deductible can significantly reduce your tax burden. Document everything and consult a tax advisor for complex expense categories.

Need Help With Corporate Tax Calculations?

At Think Biz Management Consultancies, we:

• Review your chart of accounts for deductibility
• Advise on exempt income treatment
• Prepare optimized tax returns

Book a consultation today.

 

Contact us today for a free consultation.

Contact number: ‪+971 50 983 0334‬

Email ID: info@alphabets.ae