Accounting Profit vs. Taxable Profit

Your Corporate Tax liability is not simply 9% of your bank balance. It is based on your "Taxable Income."

The Starting Point

Taxable income is determined by taking the Accounting Net Profit (from your financial statements prepared under IFRS) and making specific adjustments required by the Corporate Tax Law.

Non-Deductible Expenses

Certain expenses you record in your books cannot be deducted for tax purposes, meaning they increase your taxable profit. Examples include:

- Fines and penalties.

- Bribes or illicit payments.

- 50% of client entertainment expenses.

Exempt Income

Conversely, some income is exempt from tax, such as:

- Dividends received from domestic UAE companies.

- Capital gains from the sale of shares (under the participation exemption).

Tax Losses

If your business makes a loss, you can carry it forward to offset against taxable income in future years (capped at 75% of the taxable income in that future year).

Using software like Ledgerly automatically categorizes your expenses, ensuring your CPA has exactly what they need to calculate your final adjustments accurately.