UAE Corporate Tax Interest Deduction Limitation Guide
Editorial responsibility: Valusage Advisory Team (Editorial Practice) · Reviewed by Valusage Business Advisors Technical Practice (Technical Practice)
Direct answer
Under the UAE general interest deduction limitation rule, deductible net interest expenditure is generally limited to the greater of 30% of adjusted EBITDA or AED 12 million, subject to exclusions, related-party rules and other conditions. Disallowed net interest may generally be carried forward for up to ten subsequent tax periods, so finance should maintain a period-by-period calculation and evidence schedule.
Decision graphic
Apply the general interest limitation in four controls
General interest limitation test
Decision table
Interest deduction review questions
| Decision point | Evidence | Calculation control | Escalation |
|---|---|---|---|
| What is net interest expenditure? | Agreements and ledger mapping | Reconcile income and expenditure | Classify unusual financing items |
| What is adjusted EBITDA? | Tax computation bridge | Do not substitute accounting EBITDA | Review tax adjustments |
| Which limit is higher? | 30% test and AED 12m comparison | Retain both calculations | Confirm applicable exclusions |
| What balance carries forward? | Ten-period roll-forward | Track utilisation and expiry FIFO | Review ownership and restructuring effects |
Financing cost in the accounts is not automatically the amount deductible for Corporate Tax. The calculation starts with the nature of each item, the entity's status and the specific and general limitation rules.
What belongs in net interest expenditure? Map finance income and expenditure to the Corporate Tax definitions before applying the general test. Reconcile loans, leases, guarantees, derivatives, capitalised interest and related-party balances to agreements and the ledger.
How does the 30% or AED 12 million test work? The FTA Interest Deduction Limitation Rules Guide explains that the general limit is the greater of 30% of adjusted EBITDA or AED 12 million. Adjusted EBITDA is a tax concept and should not be replaced with an unreviewed accounting EBITDA figure.
What happens to disallowed net interest? The FTA guide states that disallowed net interest may generally be carried forward for ten subsequent tax periods, with the oldest amounts used first. Maintain opening balance, current-period movement, utilisation, expiry and closing balance.
Which additional rules require attention? Check whether an exclusion applies and whether related-party financing has a valid commercial purpose under the specific rule. Group structure, exempt income and transactions with connected parties may change the analysis.
Professional boundary This guide is general information. The calculation and availability of deductions depend on the entity, financing terms, elections, related parties and current rules. Obtain fact-specific tax advice before filing.
Professional boundary
This article is general information. It is not a filing opinion, legal advice, audit conclusion, investment recommendation or guarantee of authority acceptance or commercial outcome.
What is the UAE Corporate Tax general interest deduction limit?+
It is generally the greater of 30% of adjusted EBITDA or AED 12 million, subject to exclusions, related-party rules and the detailed Corporate Tax conditions.
Can disallowed net interest be carried forward?+
The FTA guide states that disallowed net interest may generally be carried forward for up to ten subsequent tax periods, with the oldest eligible balance used first.
Is accounting EBITDA used directly for the 30% test?+
No. Adjusted EBITDA is calculated under the Corporate Tax rules and should be reconciled from the tax computation rather than copied from an accounting KPI.
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