COGS is deducted from revenue to give gross profit. It does not include indirect costs like rent, marketing, or management salaries — those sit in operating expenses below the gross profit line. Calculating COGS accurately is critical for two reasons in the UAE: it determines your gross margin (which drives pricing and investor conversations) and it is a directly deductible expense in your corporate tax return. COGS is often confused with total operating costs; the distinction matters significantly in tax planning.
