Key takeaways
- Entertainment expenditure on customers, suppliers, shareholders and other business partners is only 50% deductible for UAE corporate tax; the other 50% is added back to taxable income (Article 32, Federal Decree-Law No. 47 of 2022).
- The FTA treats entertainment as hospitality of any kind: meals, accommodation, transport, admission fees and the facilities or equipment used for them.
- Employee-related spending such as staff parties, away days and performance rewards is not entertainment under the FTA's July 2024 guide, so it stays fully deductible if it meets the general business test in Article 28.
- Advertising, online promotion, trade shows and direct marketing sit outside the 50% cap, but discretionary hospitality at a marketing event does not.
- Input VAT on entertainment is generally not recoverable, so a client dinner can lose 50% of its corporate tax deduction and the VAT as well (FTA public clarification VATP005).
How much of entertainment expenditure is deductible for UAE corporate tax?
Half. Article 32 of Federal Decree-Law No. 47 of 2022 allows a deduction of 50% of entertainment, amusement or recreation expenditure, and it applies on top of the general rule in Article 28 that a cost must be incurred wholly and exclusively for the business. The disallowed half is a permanent difference in your tax computation, not a timing difference, so it doesn't come back in a later period.
50%: share of entertainment expenditure on customers, suppliers, shareholders and other business partners that is deductible for UAE corporate tax. Source: Federal Decree-Law No. 47 of 2022, Article 32, checked 30 October 2026.
Say a SHAMS trading company spends AED 80,000 a year on client dinners and event tickets. Only AED 40,000 is deductible, so AED 40,000 is added back to its taxable income. (This is an illustration, not a client case.)
What counts as entertainment under UAE corporate tax?
Entertainment is hospitality of any kind provided to people outside your payroll, and the FTA lists meals, accommodation, transport, admission fees and related facilities or equipment. The accounting label doesn't matter: a cost booked as "marketing" or "travel" is still entertainment if its substance is hosting someone.
The FTA's Corporate Tax Guide on the Determination of Taxable Income (CTGDTI1, July 2024, section 4.5.10) draws the line as follows.
| Type of spend | Corporate tax treatment | Basis |
|---|---|---|
| Meals, tickets or trips hosting clients, suppliers or shareholders | 50% deductible | Article 32 |
| Restaurant meals for non-employees | 50% deductible; the guide says these can't be treated as incidental | CTGDTI1, 4.5.10 |
| Complimentary hotel stays for business partners | 50% deductible | CTGDTI1, 4.5.10 |
| Sponsorship benefits used to entertain customers or partners | 50% deductible | CTGDTI1, 4.5.10 |
| Staff parties, away days, performance rewards | Not entertainment; fully deductible if Article 28 is met | CTGDTI1, 4.5.10 |
| Food or drink during a business meeting; office refreshments | Incidental; not entertainment | CTGDTI1, 4.5.10 |
| Advertising, online promotion, trade shows, direct marketing | Outside the 50% cap | CTGDTI1, 4.5.10 |
| Free or discounted products given to the public or to selected people for publicity | Outside the 50% cap | CTGDTI1, 4.5.10 |
| Purely private events, such as a family wedding | Not deductible | CTGDTI1, 4.5.10 |
Accurate as of 30 October 2026, based on the FTA guide dated 31 July 2024. Check the FTA website for any later version.
Are staff parties and team events deductible in full?
Generally yes. The FTA guide says employment-related expenditure doesn't fall under entertainment, so staff dinners, away days and performance rewards are fully deductible if they meet the general business test. The cap bites only when the people being hosted are outside your workforce.
Don't confuse this with VAT, where the answer is different (see below).
How do you treat events that mix clients and staff?
Split the cost between the staff share and the external share; the staff share is deductible in full and the external share is limited to 50%. Article 28 requires the identifiable business portion to be deducted and any portion that can't be separated to be apportioned on a fair and reasonable basis.
The guide gives no single mandatory method. Headcount is the simplest basis, and it works if you apply it consistently and keep the guest list. For marketing events, the necessary costs of promoting your goods or services (the booth, the signage) are outside the cap, while discretionary hospitality such as meals or a musical performance is inside it.
Is VAT recoverable on entertainment?
Usually not. Under FTA public clarification VATP005, input VAT on entertainment for customers, potential customers, officials and shareholders is non-recoverable even if your company makes fully taxable supplies. The legal basis is Article 53 of the VAT Executive Regulation (Cabinet Decision No. 52 of 2017).
| Spend | Input VAT position (VATP005) |
|---|---|
| Client or supplier hospitality | Blocked |
| Staff events such as parties or an Iftar | Blocked, unless a labour law obligation, a contractual obligation or documented policy that is normal business practice, or a deemed supply applies |
| Light food at a short business meeting | Recoverable |
| Tea, coffee and dates for general office use | Generally recoverable |
| Conference or business event where a fee is charged and VAT is accounted for | Recoverable |
| Short-term hotel stay for a new employee | Recoverable |
The FTA has also issued a 2026 decision on input tax recovery for certain employee expenses (FTA Decision No. 17 of 2026), so check its current text on tax.gov.ae if staff benefits are a large line in your accounts.
The two taxes also interact: Article 33 denies a corporate tax deduction for input VAT that is recoverable. On our reading, VAT you can't recover stays in the cost of the entertainment and is then subject to the 50% cap.
How should you record entertainment so it holds up?
Keep entertainment in its own ledger account and tag each transaction at the time you book it, because splitting a year of mixed expenses afterwards is slow and easy to challenge. A practical routine:
- Open a separate "Client entertainment" account in your chart of accounts, apart from "Staff welfare" and "Marketing".
- Record the date, venue, guests (names and companies) and business purpose on every invoice or in your expense tool.
- For mixed events, record headcount by group on the day.
- Book staff events to the staff account and client hospitality to the entertainment account, and review mis-postings at each month end.
- At year end, add back 50% of the entertainment account in the tax computation behind your corporate tax return on EmaraTax.
- Keep the supporting documents with your accounting records.
If you'd rather not track these dates by hand, the free UAE compliance calendar lists your company's tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file.
What most guides don't tell you
- The label on the invoice doesn't decide the treatment. The guide says the accounting classification is irrelevant, so "business development" or "client relations" in your ledger won't protect a dinner from the 50% cap; the substance (hosting a non-employee) does.
- A restaurant meal for a client is entertainment even if you discuss business throughout. The guide says food and drink at a restaurant for non-employees can't be treated as incidental. The "incidental" exclusion is for refreshments at a meeting, not a meal out.
- A sponsorship package can contain entertainment. If part of what you buy is tickets or hospitality that you hand to customers, the guide treats that part as entertainment expenditure, so ask your sponsor for an itemised split.
- Staff entertainment is safe for corporate tax but not for VAT. The same staff dinner can be fully deductible for corporate tax and still carry blocked input VAT under VATP005.
Which deadlines apply to your company?
Entertainment add-backs are only one line in a corporate tax return, and the return deadline depends on your financial year. The free UAE compliance calendar lists the tax and compliance dates that apply to your company.
Frequently asked questions
What expenses are deductible for UAE corporate tax?
Business costs that aren't capital in nature are generally deductible if they are incurred wholly and exclusively for the business (Article 28), and mixed-purpose costs are apportioned. Fines, bribes, donations to entities that aren't Qualifying Public Benefit Entities, and corporate tax itself are among the items Article 33 denies.
Is interest expense fully deductible under UAE corporate tax?
Not always. Net interest expenditure is deductible up to 30% of accounting EBITDA under Article 30, but the cap doesn't apply where net interest expenditure doesn't exceed AED 12,000,000 for the tax period (Ministerial Decision No. 126 of 2023).
What is the interest limitation rule?
Article 30 limits the deduction for net interest expenditure to 30% of accounting EBITDA. Interest that is disallowed can be carried forward and deducted in up to 10 subsequent tax periods, and banks, insurers and individuals carrying on a business are excluded from the rule.
About Qawi · Qawi is a corporate services firm licensed in the Sharjah Media City (SHAMS) free zone, handling company formation, visas and PRO, bookkeeping, VAT and corporate tax for UAE businesses. Guides are researched from FTA, Ministry of Finance and free zone sources. Qawi on LinkedIn
Sources
- Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, consolidated with amendments (Ministry of Finance, unofficial translation)
- FTA Corporate Tax Guide: Determination of Taxable Income (CTGDTI1, 31 July 2024)
- FTA Determination of Taxable Income guide page
- FTA VAT Public Clarification VATP005: Entertainment Services
- Ministerial Decision No. 126 of 2023 on the General Interest Deduction Limitation Rule (Ministry of Finance)
- FTA Decision No. 17 of 2026 on input tax recovery for employee expenses
Last checked: 30 October 2026
This is general information, not tax or legal advice for your specific situation.