Can I Claim Employee Salaries as a Business Expense in United Arab Emirates?
Yes, employee salaries paid to UAE-licensed staff are fully deductible against Corporate Tax. Note: there is no UAE personal income tax. WPS (Wage Protection System) compliance is mandatory for all UAE employers.
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What Federal Tax Authority (FTA) says
Salaries, wages, end-of-service benefits, housing and transport allowances are deductible business expenses provided they are commercially reasonable and paid through WPS. Under Article 28, pay is deductible if it is wholly and exclusively for the business. Payments to a shareholder or a connected person must be at market value, so a director's pay must reflect the work done. End of service gratuity is calculated on 21 days of basic salary for each of the first five years and 30 days for each year after that, capped at two years of pay. The cost is recognised as the entitlement builds up under the accounting standards.
When you can claim
- Basic salary, housing and transport allowances paid via WPS
- End-of-service gratuity accrual (paid on termination)
- Health insurance premiums (mandatory in Dubai/Abu Dhabi)
- Visa and labor card costs for employees
- Employer pension contributions for UAE and GCC nationals to the GPSSA
- Employer contributions to the DEWS scheme for DIFC employees
When you cannot claim
- Salaries to non-licensed individuals (e.g., paying someone without a residence visa)
- Excessive owner-shareholder salary deemed disguised profit distribution
- Personal expenses categorised as wages
- Salary paid to a family member who does no real work for the business
- Payments to staff that are not recorded through the payroll and WPS system
Good to know
Pro tip: Owner-managers should pay themselves through formal payroll (WPS) rather than ad-hoc bank transfers: it strengthens the deductibility case and supports residence visa renewals.
Important: The UAE has no personal income tax, and no payroll tax on salaries. UAE nationals and GCC nationals working in the UAE contribute to the General Pension and Social Security Authority, with employee 5 percent, employer 12.5 percent and government 2.5 percent. Employers in the DIFC must pay into the DIFC Employee Workplace Savings (DEWS) plan, with at least 5.83 percent of basic salary for staff with up to five years of service and 8.33 percent after that.
Related expenses
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