Home-Work Arrangement and Corporate Tax

The Federal Tax Authority (FTA) recently released the Corporate Tax Guide (CTGDTI1) on the determination of Taxable Income, presenting an insightful scenario in Case Study 1. This case addresses the home-work arrangement and the admissibility of company expenses, raising several significant points for consideration.

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Explanatory Note 5.3.1 (B) - Criteria for Deductibility of Home-Working Expenses:

The guide specifies that expenses incurred due to an exclusively work-from-home arrangement are deductible. It particularly mentions the reimbursement of increased associated costs for such employees, like home office setup and a portion of utility bills, as allowable expenses. These expenses are deemed wholly and exclusively for business purposes.

Excerpt reproduced from the Corporate Tax Guide (CTGDTI1):

However, the guide does not provide detailed guidelines on:

- The specific items included in the home office setup.

- The percentage or allocation keys to determine the portion of utility bills as deductible expenses.

Key Scenarios and Questions:

1. Broadband Expenses:

?? - If an employee already has a broadband connection at home, can this existing expense be claimed as a deduction?

?? - Is this additional expense only deductible if the employee needs to install a new broadband connection solely to facilitate home-working?

2. Typical Remote Work Expenses:

?? - Are expenses related to phone use for business activities, postage, online subscriptions (e.g., Zoom, Microsoft Office etc.), printer and supplies, office supplies, and repairs and maintenance to office set-up like laptop, furniture etc. covered?

?? - If an employer provides office equipment and furniture for home-work arrangements, is the depreciation of these capital assets deductible?

Further Considerations:

- Are only the additional costs incurred by the employee due to home-working admissible?

- What qualifies as a residence for expense deductions? Is it limited to one residential premises used by the remote worker for their employment duties or multiple residences can be considered?

- If an employee is recalled to the office during the year, are the incurred expenses still deductible? What if the employee worked from home for a substantial period during the year?

- What criteria will determine whether an employee is working full-time or part-time in a home-office arrangement?

- If an employee works from home regularly, such as two days a week (even if the days vary), will this be considered regular enough to qualify for deductions?

These scenarios underscore the complexities companies and employees face when navigating corporate tax regulations in the context of home-work arrangements. Understanding the criteria for deductible expenses is crucial for ensuring compliance and optimizing tax benefits.

I invite my professional network to discuss these scenarios further and explore the practical implications for businesses. Let’s delve into the nuances of home-work arrangements and corporate tax together.

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Disclaimer: ?The information provided in this article represents the author's interpretations, conclusions, proposals, and opinions. It is not intended to constitute legal advice or be specific to any client or situation. This article should not be considered an official publication on Federal Taxes in the UAE. The official sources for such information are the Ministry of Finance and the Federal Tax Authority. Should you identify any inaccuracies or errors, please notify the author so that corrections can be made.

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