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UAE Corporate Tax has been in force since June 2023. But two years in, most SMEs are still leaving money on the table — claiming far less than they are legally entitled to deduct.

Here are the 5 deductions that most UAE SMEs are missing — and exactly how to claim them.

1. Start-Up Costs and Pre-Trading Expenses

Many businesses incur significant costs before they officially start trading — licensing fees, legal costs, consultant fees, initial marketing. These are deductible under UAE CT law as long as they are incurred wholly and exclusively for the business.

What to do: Compile all pre-trading invoices and receipts. Ensure they are reflected in your first CT return. Do not write them off as sunk costs.

2. Employee End of Service Gratuity — Accrual Basis

Under UAE Labour Law, every employee is entitled to an end-of-service gratuity. Under UAE CT, you can deduct the accrued gratuity expense each year — not just when it is actually paid out.

What to do: Calculate your total gratuity liability for all employees as at your financial year end. Book the accrual in your accounts. Claim it as a deduction.

3. Lease Interest Under IFRS 16

If your company applies IFRS 16 and has capitalised its office or warehouse lease as a right-of-use asset, the interest component of your lease liability is a deductible finance cost — separate from the depreciation charge on the asset.

What to do: Ask your accountant to split your IFRS 16 charge into depreciation and interest. Claim the interest as a finance cost deduction. Many SMEs miss this entirely.

4. Bad Debt Write-Offs Under IFRS 9

Expected Credit Loss (ECL) provisions under IFRS 9 are generally not deductible until the debt is actually written off. But once a debt is formally written off as irrecoverable, it becomes a CT deductible expense.

What to do: Review your aged receivables. Any debt over 12 months with no realistic recovery prospects — write it off formally in your books and claim the deduction.

5. Directors’ Remuneration — If Arm’s Length

Owner-managers often underpay themselves — or take drawings instead of a salary. Under UAE CT, a director’s salary is deductible only if it is at arm’s length (i.e., what you would pay an unrelated person for the same role).

What to do: Benchmark your director’s salary against market rates for your industry and role. Document the basis. Pay yourself a proper arm’s length salary through payroll — it reduces your taxable profit legally.

The Bottom Line

UAE Corporate Tax compliance is not just about filing on time. It is about maximising every legitimate deduction available to your business. These five areas alone could reduce your CT liability by tens of thousands of dirhams.

Need a CT health check for your business? Contact FSH Financial Consultants at info@fshconsultants.com — we specialise in UAE Corporate Tax planning and compliance for SMEs.