Mixing personal and business spending
I pay some personal expenses from the company account. Is that a tax problem?
The situation
Personal expenses are not deductible for Corporate Tax and the VAT on them is not recoverable. Mixing them makes books unreliable.
The law
- Art 28, Federal Decree-Law 47 of 2022: Only expenses incurred for the business are deductible
- Art 54, Federal Decree-Law 8 of 2017: Input tax only for business use
What it means for you
Book personal spends as owner drawings or a loan to the owner, not as expenses. Example: AED 40,000 of family holiday costs booked as travel would be added back, costing AED 3,600 in tax at 9 percent, and any VAT claimed must be reversed.
What to do
- Use a separate personal card.
- Book personal spends to owner drawings.
- Reverse any VAT claimed on them.
- Review the ledger monthly.
We can do this for youBookkeeping, accounting standards and audited financial statements: what the FTA, free zones and banks require: AED 800