Deducting the owner's salary
I am the owner and manager. Can my company deduct the salary it pays me?
The situation
Payments to connected persons, such as owners and directors, are deductible only up to the market value of the services. Anything above is added back.
The law
- Art 36, Federal Decree-Law 47 of 2022: Payments to connected persons deductible only at market value
What it means for you
Example: the company pays you AED 80,000 a month, but a manager in a similar role earns about AED 45,000. The FTA could disallow AED 35,000 a month, AED 420,000 a year, which costs AED 37,800 in tax. Keep a short benchmark note, job description and board approval. Withdrawals of a sole proprietor are not deductible at all.
What to do
- Write down your role and hours.
- Benchmark the pay against similar jobs.
- Get board approval in writing.
- Add back any excess in the return.
We can do this for youStandard Corporate Tax return: taxable income computation at 0% and 9%, adjustments, losses and payment: AED 4,750