Implements Article 30 of the Corporate Tax Law on limiting net interest deductions to a percentage of EBITDA, defines how EBITDA is computed for the rule, and exempts taxable persons whose net interest expenditure is below AED 12 million in the tax period.
Ministerial Decision No. 126 of 2023 implements Article 30 of the Corporate Tax Law (Federal Decree-Law No. 47 of 2022), the General Interest Deduction Limitation Rule that caps deductible Net Interest Expenditure at 30% of EBITDA. The decision says what counts as Interest, how EBITDA is measured, when the cap does not apply, and how it works for Tax Groups and legacy debt. It was issued on 23 May 2023, came into effect the day after publication, and remains in force.
Article 8 is the provision most clients need. The limitation does not apply where Net Interest Expenditure for the Tax Period does not exceed AED 12,000,000. Above that, the Taxable Person may deduct the higher of AED 12,000,000 and the 30% of EBITDA figure in Article 30(1). The AED 12,000,000 figure is pro-rated where the Tax Period is longer or shorter than 12 months. A company with net interest below the de minimis deducts it in full, subject to the other deductibility rules in the law.
Articles 2 to 7 widen the meaning of Interest beyond the accounting label. It includes the interest component of debt instruments, cash-fund units, asset-backed securities, repos, stock lending, securitisations, finance leases and factoring; amounts incurred in raising finance such as guarantee, arrangement and commitment fees and hedging derivatives; the interest-equivalent component of Islamic Financial Instruments; the finance element of finance and non-finance leases; foreign exchange gains and losses on Interest; and capitalised Interest, which is caught when amortised.
Article 9 defines EBITDA as the greater of zero and Taxable Income under Article 20 plus Net Interest Expenditure, depreciation and amortisation taken into account for Taxable Income, and Interest on historical financial assets and liabilities held before 9 December 2022, excluding Qualifying Infrastructure Project interest. Article 11 grandfathers debt whose terms were agreed before 9 December 2022, together with hedges of that debt, limited to the interest that would have arisen on the terms as they stood on that date and to principal the lender was already obliged to advance.
Article 12 sets Tax Group rules: a Subsidiary's pre-grouping carried-forward Net Interest Expenditure can only be used against group Taxable Income attributable to that Subsidiary, group carry-forwards stay with the group when a Subsidiary leaves, and on cessation they stay with the Parent if it remains taxable. Banks and Insurance Providers in a group are disregarded. Article 13 applies the rule to the taxable business of otherwise Exempt Persons. Article 14 exempts Net Interest Expenditure of a Qualifying Infrastructure Project Person on projects exclusively for the public benefit of the UAE in transport, utilities, education, healthcare or other services the Minister specifies, with assets in the UAE lasting at least 10 years and all interest arising in the UAE.
Every Taxable Person with Net Interest Expenditure, including Tax Groups and the taxable business of Exempt Persons. Banks, Insurance Providers and (under the law) natural persons are outside the rule, and Qualifying Infrastructure Project Persons are exempt for project interest. The AED 12,000,000 de minimis takes most small and medium businesses outside the cap.
| Articles 2–3 | Interest includes the interest component of debt instruments, cash-fund units, asset-backed securities, repos, stock lending, securitisations, finance leases and factoring, and amounts incurred in raising finance such as guarantee, arrangement and commitment fees and hedging derivatives. |
| Articles 4–7 | The interest-equivalent component of Islamic Financial Instruments, the finance element of finance and non-finance leases, foreign exchange gains and losses on Interest, and capitalised Interest (when amortised) are all treated as Interest for the rule. |
| Article 8(1) | The limitation in Article 30(1) of the Corporate Tax Law does not apply where Net Interest Expenditure for the Tax Period does not exceed AED 12,000,000. |
| Article 8(2)–(3) | Above the de minimis the Taxable Person may deduct the higher of AED 12,000,000 and the Article 30(1) percentage of EBITDA; the AED 12,000,000 is pro-rated for Tax Periods longer or shorter than 12 months. |
| Article 9 | EBITDA is the greater of zero and Taxable Income plus Net Interest Expenditure, depreciation and amortisation, and Interest on financial assets and liabilities held before 9 December 2022, excluding Qualifying Infrastructure Project interest; capitalised Interest enters EBITDA when amortised. |
| Article 11 | Debt instruments and liabilities whose terms were agreed before 9 December 2022, and hedges of them, are outside the rule, limited to the interest that would arise on the terms as at that date and to principal the lender was already obliged to advance. |
| Article 12 | In a Tax Group, a Subsidiary's pre-grouping carried-forward Net Interest Expenditure is usable only against group income attributable to it; group carry-forwards stay with the group on a Subsidiary's exit and with the Parent on cessation; Bank and Insurance Provider members are disregarded. |
| Article 13 | An Exempt Person under Article 4(1)(a)–(d) that is taxable on a Business under Articles 5 to 8 of the law is subject to the rule in respect of that Business. |
| Article 14 | Net Interest Expenditure of a Qualifying Infrastructure Project Person on a project exclusively for the public benefit of the UAE in transport, utilities, education, healthcare or other specified services, with UAE assets lasting at least 10 years and all interest arising in the UAE, is exempt from the rule. |
| Article 15 | The decision was published and came into effect the day following publication; it was issued on 23 May 2023. |
Clients financing UAE companies with shareholder or bank loans need the AED 12,000,000 de minimis and EBITDA rules to know whether interest is fully deductible. For almost all of the companies we administer the answer is that net interest is well below AED 12,000,000 and the cap never bites, so the real work is the ordinary deductibility tests: that the loan is at arm's length under Article 34, that related-party interest is not caught by Article 31, and that the borrowing was for the business. Where a client is buying property or a business with substantial bank debt, we model EBITDA under Article 9 before the loan is drawn, and we check whether existing facilities were agreed before 9 December 2022 so that the grandfathering can be claimed on their original terms. The wide definition of Interest means we pull arrangement and guarantee fees and the finance element of leases into the computation rather than leaving them in operating expenses.
Corporate Tax Law
Imposes federal corporate tax on the taxable income of UAE companies and businesses at 0% up to a Cabinet-set threshold and 9% above it, with 0% on the qualifying income …
Small Business Relief Decision
Lets a resident taxable person with revenue of AED 3 million or less in the current and all previous tax periods elect to be treated as having no taxable income, for tax …
Tax Group Decision (2024)
Replaces Ministerial Decision No. 125 of 2023 for tax periods starting on or after 1 January 2025, setting the rules for forming and operating a corporate tax group, incl…
Taxable Income Rules Decision
Sets the adjustments made to accounting income to arrive at taxable income, including the election for accrual-basis taxpayers to recognise gains and losses only on reali…
Whether you are establishing a new venture, restructuring an existing enterprise, or exploring residency pathways — we are here to advise.
Arrange a Consultation →