Continuing our tour of the UAE tax system, let's delve into expenses that reduce the taxable base in the context of corporate tax. These include:
🔺 Expenses incurred "wholly and exclusively" for business purposes.
🔺 Dual-purpose expenses (business and personal simultaneously) are accounted for on a proportional basis (gasoline - 80% for business, 20% for taking children to school).
🔺 If Net Interest Expenditure exceeds AED 12,000,000, the interest is partially attributed to expenses.
🔺 Entertainment expenses - food, accommodation, transportation, entrance fees, and premises and equipment - are 50% of expenses.
It's also worth noting what is meant when we talk about adjusting taxable income:
🔺 Unrealized profits or losses
🔺 Exempt income
🔺 Non-deductible expenses
🔺 Incentives for specific types of operations
🔺 Transfer pricing adjustments related to transactions between related parties.
To complete our expense checklist, let's also mention expenses not deductible from income and conditions under which no tax expense reimbursement is available.
These so-called NON-DEDUCTIBLE EXPENSES include:
🔺 Expenses and losses not incurred for the business purposes of the taxpayer.
🔺 Expenses incurred in earning exempt income.
🔺 Donations, grants, or gifts to an organization that is not a qualified public organization.
🔺 Any fines and penalties, except amounts intended as compensation for losses or contract violations.
🔺 Dividends, corporate tax, recoverable input VAT, contributions to private pension funds.
Finally, the list of conditions when a taxpayer cannot claim tax expense reimbursement:
🔺 Losses incurred before the start date of corporate tax.
🔺 Losses incurred before the person becomes a taxpayer or losses generated from income exempt from corporate tax.
🔺 Transferred tax losses can be used to reduce the taxpayer's income in the Tax Period by 75% of that taxable income.
🔺 The transfer of tax losses is possible if the owner continuously owns at least 50% of the property from the beginning of the period in which the loss was incurred.
🔺 Expenses incurred "wholly and exclusively" for business purposes.
🔺 Dual-purpose expenses (business and personal simultaneously) are accounted for on a proportional basis (gasoline - 80% for business, 20% for taking children to school).
🔺 If Net Interest Expenditure exceeds AED 12,000,000, the interest is partially attributed to expenses.
🔺 Entertainment expenses - food, accommodation, transportation, entrance fees, and premises and equipment - are 50% of expenses.
It's also worth noting what is meant when we talk about adjusting taxable income:
🔺 Unrealized profits or losses
🔺 Exempt income
🔺 Non-deductible expenses
🔺 Incentives for specific types of operations
🔺 Transfer pricing adjustments related to transactions between related parties.
To complete our expense checklist, let's also mention expenses not deductible from income and conditions under which no tax expense reimbursement is available.
These so-called NON-DEDUCTIBLE EXPENSES include:
🔺 Expenses and losses not incurred for the business purposes of the taxpayer.
🔺 Expenses incurred in earning exempt income.
🔺 Donations, grants, or gifts to an organization that is not a qualified public organization.
🔺 Any fines and penalties, except amounts intended as compensation for losses or contract violations.
🔺 Dividends, corporate tax, recoverable input VAT, contributions to private pension funds.
Finally, the list of conditions when a taxpayer cannot claim tax expense reimbursement:
🔺 Losses incurred before the start date of corporate tax.
🔺 Losses incurred before the person becomes a taxpayer or losses generated from income exempt from corporate tax.
🔺 Transferred tax losses can be used to reduce the taxpayer's income in the Tax Period by 75% of that taxable income.
🔺 The transfer of tax losses is possible if the owner continuously owns at least 50% of the property from the beginning of the period in which the loss was incurred.