Hosting clients, suppliers and partners is a normal cost of doing business, but under UAE corporate tax it is not all treated alike. Getting the split right protects your taxable income figure and your audit file.
The 50% rule
Under Article 32 of Federal Decree Law No. 47 of 2022, 50% of entertainment, amusement and recreation expenditure is deductible in the tax period. The remainder is added back when you compute taxable income at the 9% rate above AED 375,000.
- Meals, events and hospitality for customers, suppliers and shareholders.
- Discretionary extras such as performances or accommodation at an event.
- Client gifts, which follow the same restriction.
What is generally fully deductible
- Entertainment provided to your own employees, such as staff events.
- Incidental refreshments at office meetings.
- Genuine business costs that are not entertainment, such as travel and conference fees.
Mixed events need care. If staff and clients attend the same dinner, the client share is restricted and the staff share is not. Record who attended.
Audit ready habit
Set two ledger accounts today: staff entertainment and client entertainment. It removes most year end adjustments.
Documentation that stands up to review
Keep these for every claim
A tax invoice, the business purpose, the guest list with employers, and the approval. Recoverable input VAT is not a deductible expense, so do not include it in the cost.
Code it correctly at source
Use separate ledger accounts for staff and client entertainment so the add back is automatic at year end.
Key takeaways
- Client and partner entertainment is generally 50% deductible.
- Staff entertainment is generally fully deductible.
- Separate accounts and guest lists make the tax computation quick and defensible.
Frequently asked questions
Is a client gift entertainment?
Client gifts are generally treated within the entertainment restriction, so the 50% limit applies.
Does the rule apply to free zone companies?
Qualifying income of a qualifying free zone person is taxed at 0%, but any non qualifying income follows the normal deduction rules. We review your position before filing.
Talk to a chartered accountant
Questions about your own situation? Reach us directly and we will reply with clear next steps.
This article is general information and not advice for your specific circumstances. Rules and thresholds change, so confirm the current position before you act.
