Entertainment and meals in the tax computation

The situation

Only 50 percent of entertainment, amusement and recreation costs for customers, shareholders and suppliers is deductible. Staff costs follow normal rules.

The law

• Art 32, Federal Decree-Law 47 of 2022: 50 percent cap on entertainment expenditure

What it means for you

Example: AED 60,000 of client dinners means AED 30,000 is added back, costing AED 2,700 in tax at 9 percent. Team events for employees are generally staff costs and deductible if they are for the business. Book client entertainment in its own ledger account so the add-back is easy.

What to do

1. Create a separate ledger for client entertainment.
2. Separate staff welfare costs.
3. Add back 50 percent of client entertainment.
4. Keep receipts and guest names.

Related

• Dividends received by a UAE company
• Interest expense limit
• Calculating Corporate Tax on a profit
• Deducting the owner's salary
• Using last year's tax loss
• Cash basis versus accrual accounts