Deductible vs Non-Deductible Expenses (Corporate Tax)

By Shihabudeen Pattasseri, FTA-Registered Tax Agent (TAAN 20056925) · Updated 2026-11-03

Your Corporate Tax bill is based on taxable income, which starts from accounting profit and adjusts for the tax rules on expenses. Knowing which costs are deductible — and which are not — directly affects what you pay.

Generally deductible

Expenses incurred wholly and exclusively for the business, and not capital in nature, are generally deductible — salaries, rent, utilities, marketing, professional fees and similar running costs.

Restricted or capped

• Entertainment: only 50% of client and business entertainment expenses are deductible
• Interest: net interest deductions are capped under the general interest limitation rule (broadly 30% of adjusted EBITDA, with a safe-harbour amount)

Non-deductible

• Fines and penalties (other than ordinary contractual damages)
• Donations to non-qualifying recipients
• Corporate Tax itself, and recoverable input VAT
• Expenses not related to the business, or lacking evidence

Why documentation matters

A deduction the FTA cannot verify is a deduction at risk. Keep invoices and evidence linking each cost to the business. Clean records are what turn a reasonable tax position into a defensible one.

Frequently asked questions

Is entertainment deductible under Corporate Tax?

Only 50% of client and business entertainment expenses are deductible.

Are fines deductible?

No. Administrative fines and penalties are generally not deductible.

Is there a limit on interest deductions?

Yes. Net interest is capped under the general interest limitation rule, broadly 30% of adjusted EBITDA, with a safe-harbour amount.

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