Fines and donations
Are traffic fines or government penalties deductible?
Usually safe if you keep the documents
The basic rule
Fines and penalties are not taken off the profit, except amounts awarded as compensation for damage or breach of contract. Bribes and other illegal payments never count.
When it is different
- Compensation you pay a client for breach of contract or damages can be deductible.
- Late payment interest or charges agreed in a commercial contract with a supplier are not a government fine; whether they are deductible depends on the contract and the facts, under the general rule.
- FTA penalties, traffic fines, municipality and free zone fines are not deductible.
Documents to keep
- Fine notice
- Contract and settlement for compensation payments
How safe is it?
Usually safe if you keep the documents Low: the rule is clear. Record fines as non-deductible.
When to ask a professional
Ask only for settlements that might be compensation. Who can confirm it for your own case: an FTA-registered tax agent (a tax professional approved by the UAE tax authority), or the optional year-end review in SoloBooks.
If you pay no Corporate Tax this year (Small Business Relief): If you use Small Business Relief this year, you pay no Corporate Tax anyway, so this cost does not change your tax for that year. Keep the documents anyway: they back up your income figure, and they matter if you stop qualifying later.
Check it with the free calculator: Small Business Relief calculator →
Sources
- Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (consolidated, unofficial English translation) — Art. 33(2) and 33(3)
General information, not tax advice. Your situation may differ.
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Related questions
- Are charity donations or zakat deductible?
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- What are the traps with Small Business Relief?
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