Are municipal and emirate-level taxes deductible?
Yes, municipal and property taxes are deductible, but a tax imposed under an Emirate law (like Dubai's tax on foreign banks) is not.
Show the full answerShow less
The detail
Municipal and property taxes, as local taxes not in the nature of Corporate Tax, are deductible from Taxable Income. However, a tax imposed under an Emirate law — such as the tax on branches of foreign banks under Dubai Law No. 1 of 2024 — is not deductible, and the availability of a credit against Corporate Tax under that Emirate law does not change this. This is the FTA's guidance position, not a statutory article beyond the general deduction rules.1
What the law says
- Per the FTA's Determination of Taxable Income guide (FTA guidance, not legislation), local taxes not in the nature of Corporate Tax, such as municipal and property taxes, are deductible.1 Based on FTA guidance
- A tax under an Emirate law, such as that paid by branches of foreign banks in the UAE, is not allowed as a deduction from Taxable Income under the Corporate Tax Law.1 Based on FTA guidance
- The availability or not of a credit against a tax under Emirate law in respect of Corporate Tax does not alter the non-deductibility of such tax.1 Based on FTA guidance
What it depends on
Check before you rely on it
- Confirm the tax you paid is a municipal or property tax, not a tax imposed under a specific Emirate law.
- Check whether the Emirate-level tax relates to activities like foreign banking, which is expressly disallowed.
Sources (1) — read the official text
-
Read the article
• • tax on income imposed outside the UAE (however, tax relief may be available as a Foreign Tax Credit),54 and contributions made by employers to a private pension fund in respect of its employees which are not paid in the Tax Period, or are in excess of 15% of the employee’s total remuneration in the relevant Tax Period (see Section 5, i.e. Case Study 1 for details).55 Local taxes that are not in the nature of Corporate Tax, such as municipal and property taxes, will be deductible. However, a tax under an Emirate Law, such as that paid by branches of foreign banks in the UAE is not allowed as a deduction from Taxable Income under the Corporate Tax Law. The availability or not, of a credit against a tax under Emirate Law in respect of Corporate Tax, such as under Dubai Law No. 1 of 2024 on Taxation of Foreign Banks Operating in the Emirate of Dubai, does not alter this. 4.5.10. Entertainment expenditure Entertainment is considered as hospitality of any kind and entertainment expenditure is the expense of providing entertainment. It is common to incur such costs for the entertainment, amusement or recreation of customers, shareholders, suppliers, or other business partners, such as hospitality at restaurants, cultural events, sporting events, hotel stays and similar trips. Entertainment expenditure usually serves to build relationships and promote the Business in a more informal or social setting. Entertainment expenditure includes expenditure in connection with meals (food and beverages), accommodation, transportation, admission fees, as well as facilities and equipment used in connection with such entertainment.56 However, this type of expenditure often contains a private element that is provided for the enjoyment or hospitality of the recipients/guests that would prevent the expenditure from being wholly and exclusively incurred for Business purposes. Thus, a 50% deduction for entertainment expenditure is allowed for Corporate Tax purposes.57 For Corporate Tax purposes, the accounting classification of a particular expense is not relevant when considering whether such an expense is entertainment expenditure. 54 Articles 33(8) and 47 of the Corporate Tax Law. 55 Article 5(2) of Ministerial Decision No. 115 of 2023. 56 Article 32(2) of the Corporate Tax Law. 57 Article 32(1) of the Corporate Tax Law. Corporate Tax Guide | Determination of Taxable Income | CTGDTI1 34
Written by AI from the FTA sources above and checked before display. Not tax advice or official FTA information - confirm with a tax adviser before you act. Full disclaimer
Ask your own question
Related questions
- Is a holding company subject to Corporate Tax?
- How is a partnership taxed under Corporate Tax?
- Can a family business run through several licences be taxed as one?
- How are foreign exchange gains and losses treated for Corporate Tax?
- Is a gain on revaluation of property taxed under Corporate Tax?
- Can a company elect the realisation basis for gains and losses?
- How are provisions and accruals treated for Corporate Tax?
- Is income from a foreign branch taxed in the UAE?
Filing Corporate Tax? Free Corporate Tax return guidance, in 5 easy steps