On 23 May 2023, the United Arab Emirates (UAE) Ministry of Finance (MoF) published Decision No. 126 of 2023 on the general rules for limiting the deduction of interest for corporate tax purposes.
To determine the deductible interest from taxable income, the higher value is considered: AED 12,000,000 or 30% of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA).
For the purposes of the General Interest Deduction Limitation Rule, accounting earnings before the deduction of interest, tax, depreciation and amortization (EBITDA) for a Tax Period shall be the greater of AED 0 (zero dirham) or the amount calculated as the Taxable Income in accordance with Article (20) of the Corporate Tax Law and any implementing decision issued thereunder, with the addition of all of the following:
- Net Interest Expenditure for the relevant Tax Period.
- Depreciation and amortization expenditure taken into account in determining the Taxable Income for the relevant Tax Period.
- Any Interest income or expenditure relating to historical financial assets or liabilities held prior to 9 December 2022.
Interest income and Interest expenditure in relation to Qualifying Infrastructure Projects exempted under Article (14) of Decision No. 126 of 2023 should be excluded when calculating the Taxable Person’s EBITDA for the purposes of the General Interest Deduction Limitation Rule.
In calculating EBITDA for the purposes of the General Interest Deduction Limitation Rule, any amount of income and expenditures attributable to the Interest capitalized by the Taxable Person in accordance with the Accounting Standards shall be included when the capitalized Interest is amortized over the useful life of the related asset, and not when the Interest is incurred.
