Non-deductible expenses
In one sentenceExpenses recorded in the books that the law does not accept as deductions from income, such as fines, personal expenses and undocumented items, so they are added back to profit.
Simply put
These expenses stay in the income statement for accounting purposes, but when calculating the tax they are added back to profit, so the base rises.
What is most often disallowed in an audit: an expense without an invoice, an expense unrelated to the business, and the owners' personal expenses.
Worked example
A trading company has an accounting profit of 300,000 SAR, and its expenses include fines of 15,000 SAR and the owner's personal expenses of 10,000 SAR.
Accounting net profit300,000 SAR
Add: fines15,000 SAR
Add: personal expenses10,000 SAR
Calculation300,000 + 15,000 + 10,000
Profit after tax adjustment325,000 SAR
Don't confuse it with
Adjusted net profitFor Zakat, profit is adjusted by adding back similar items; the idea is the same but the rules differ between the two systems.