Practical Examples
Example 1: Client Dinner
A company spends AED 5,000 on a client dinner.
- Accounting expense: AED 5,000
- Tax deduction: AED 2,500 (50%)
- Add back: AED 2,500
Example 2: Staff Team Building
A company spends AED 10,000 on a staff team-building event.
- This is entertainment/recreation → 50% non-deductible
- Tax deduction: AED 5,000
Example 3: Business Travel Meal
An employee on a business trip spends AED 500 on meals.
- If reasonable and during official travel → fully deductible
- If it includes client entertainment → 50% rule applies
Key Takeaway
Always classify entertainment expenses separately in the chart of accounts to facilitate accurate tax computation.