Operational Expenses Under UAE Corporate Tax

Operational expenses are fundamental to running any business. Under UAE corporate tax law, certain operational costs are deductible, which can significantly impact your company’s taxable income. This blog explores the key operational expenses that are allowed and provides practical examples to help you understand how to apply these deductions.

Rent and Lease Expenses

Expenses related to renting or leasing property for business purposes, such as office spaces, warehouses, or retail outlets, are deductible. These costs are essential for businesses to maintain their operational facilities.

Utilities

Payments for utilities, including electricity, water, gas, and internet services, are necessary for business operations and thus deductible. Keeping detailed records of utility bills and payments is crucial for substantiating these expenses.

Example:

• If your business rents an office space for AED 120,000 per year and incurs AED 20,000 annually in utilities, these amounts can be deducted from your taxable income.

Office Supplies and Consumables

Expenses for office supplies such as stationery, printer ink, and other consumables used in daily business activities are deductible. These are essential for daily business operations and are considered legitimate expenses by the tax authorities. Receipts and invoices for these purchases should be kept for documentation purposes.

Example:

• Purchasing office supplies costing AED 15,000 in a year is deductible.

Maintenance and Repairs

Costs incurred for the maintenance and repair of business assets, including machinery, equipment, and property, are deductible. These expenses ensure the continued functionality of business assets without enhancing their value significantly

Advertising and Marketing

Costs related to advertising and marketing activities, such as online ads, promotional events, and public relations efforts, are deductible. These expenses must directly relate to the business’s income-generating activities.

For a deeper understanding of deductible expenses, read our blogs on Employee Costs and Depreciation to see how these expenses can also impact your tax filings.

Conclusion

Understanding and correctly categorizing operational expenses can reduce your taxable income, resulting in significant tax savings. For more guidance, visit our corporate taxation section at FinTaxNest.

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