This UAE Corporate Tax worked case study follows the FTA's official Case Study 1 from Guide CTGDTI1, illustrating how a UAE healthcare company (Company F) computes Taxable Income by identifying deductible and non-deductible expenses under Federal Decree-Law No. 47 of 2022. Abdelhamid & Co. (FTA TAAN 20033908, MOE LC0106-01) uses this methodology when preparing Corporate Tax computations for clients across Dubai, Sharjah, and the UAE.
Case Study Facts — Company F (UAE Healthcare, 2024)
- UAE-incorporated, tax-resident company in the healthcare industry
- Incorporated 1 January 2024 — Accrual Basis, Gregorian calendar year Tax Period
- Wholly owns Company Q (a Qualifying Public Benefit Entity — QPBE — exempt under Art. 9)
- Ms K (senior employee): 70% time for Company F, 30% for Company Q — full salary borne by Company F
- Revenue 2024: AED 70,000,000 (audit required — exceeds AED 50M)
- Accounting Income: AED 12,760,000
Full Tax Adjustment Schedule
| Adjustment | Amount AED | Legal Basis |
|---|---|---|
| Accounting Income | 12,760,000 | Art. 20 starting point |
| + Items purchased for Company Q (no reimbursement) | 700,000 | Art. 28 — not for Business |
| + Ms K's salary — 30% for Company Q activities | 600,000 | Art. 28(3) — multi-purpose |
| + Entertainment for shareholders' family members | 200,000 | Art. 28 — not for Business |
| + 50% of business partner entertainment | 250,000 | Art. 32(1) — 50% cap |
| + Donations to non-QPBE organisations | 700,000 | Art. 33(1) |
| + Speeding fines and penalties | 20,000 | Art. 33(2) |
| + Bribe to secure a contract (illicit payment) | 2,000,000 | Art. 33(3) |
| + Unpaid pension fund contribution (accrued not paid) | 1,000,000 | Not paid in period |
| + Provision for healthcare regulator fines | 1,000,000 | Art. 33(2) — not yet imposed |
| Taxable Income | 19,230,000 | |
| 0% on AED 375,000 | — | |
| 9% on AED 18,855,000 | 1,696,950 | |
| Corporate Tax Payable | 1,696,950 |
Key Adjustment Notes
Items Purchased for Company Q (AED 700,000)
Company F paid AED 700,000 for goods/services for Company Q with no reimbursement. These are not incurred for Company F's Business. Non-deductible in full under Art. 28.
Ms K's Shared Salary — 30% Add-Back (AED 600,000)
Ms K's total salary is borne by Company F but 30% of her time is spent on Company Q's charitable work. Only the 70% portion attributable to Company F's Business is deductible. The 30% non-business portion (approximately AED 600,000) is added back under Article 28(3).
Business Partner Entertainment — 50% Cap (AED 250,000)
Entertainment expenditure for business partners totalling AED 500,000 is subject to the 50% deductibility cap under Article 32. Only AED 250,000 is deductible; AED 250,000 is added back. Employee entertainment (team-building, seasonal events) is fully deductible — the 50% cap only applies to external party entertainment.
Bribe to Secure Contract (AED 2,000,000)
An inducement payment made to a customer's employee to secure a new contract is explicitly non-deductible under Article 33(3) as an illicit payment. Additionally, this may expose Company F to criminal liability under UAE anti-bribery laws.
Provision for Regulatory Fines (AED 1,000,000)
Company F recorded a provision for anticipated fines from the healthcare regulator. Fines are non-deductible under Art. 33(2) and provisions for them are similarly non-deductible. The provision is added back in full.
Key Lessons for UAE Businesses
- Inter-company cost sharing requires documented reimbursement — unreimbursed subsidiary costs are non-deductible
- Dual-role employee salary costs must be apportioned using objective records (timesheets)
- Donations are only deductible to government-approved QBPEs
- Bribes and illicit payments are permanently non-deductible and carry criminal risk
- Provisions for fines are non-deductible — fines themselves are non-deductible
Frequently Asked Questions — UAE Corporate Tax Expense Case Study
Can a UAE company deduct costs it paid on behalf of a subsidiary?
Only if the subsidiary reimburses the parent. Costs paid for another entity without reimbursement are not incurred for the paying company's Business and are non-deductible under Article 28.
Are charitable donations deductible for UAE Corporate Tax?
Only if made to a Qualifying Public Benefit Entity (QPBE) approved under Cabinet Decision No. 37 of 2023. Donations to non-QPBE organisations are non-deductible under Article 33(1).
How does UAE Corporate Tax treat shared employee costs for dual-role staff in Dubai?
The non-business portion must be identified and added back under Article 28(3). Documented timesheets or objective cost allocation records are essential to support the business-use proportion claimed.
Are provisions for fines deductible under UAE Corporate Tax on Accrual Basis?
No. Provisions for fines are non-deductible because fines themselves are non-deductible under Article 33(2). A provision is only deductible if the underlying expenditure it covers would itself be deductible.
What is the UAE Corporate Tax treatment of business partner entertainment in Dubai?
50% only under Article 32. The remaining 50% is permanently non-deductible. Employee entertainment (team events) is fully deductible and not subject to the 50% cap.
Related Services
Our team provides CT Compliance Review, CT Return Filing, and External Audit services. See the Federal Tax Authority for official guides and our Insights page for more worked examples.
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