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General interest deduction limitation

Applies
FY2024 onwards
Reviewed
Rule
UAE-CT-INTGEN-2024.1
By

How much net interest is deductible in the UAE?

Up to the higher of 30% of tax EBITDA and AED 12 million. A disallowed amount carries forward for 10 tax periods.

Per Federal Decree-Law No. 47 of 2022, Article 30, General Interest Deduction Limitation Rule

A Taxable Person's Net Interest Expenditure is deductible up to a published proportion of its earnings before interest, tax, depreciation and amortisation for the Tax Period, excluding Exempt Income under Article 22 — computed, under Ministerial Decision No. 126 of 2023, from Taxable Income with Net Interest Expenditure, depreciation and amortisation added back, and never below nil. Net Interest Expenditure is the amount by which Interest expenditure incurred in the period, including any amount carried forward, exceeds taxable Interest income derived in the same period. The limitation does not apply where Net Interest Expenditure does not exceed the de minimis the Minister specifies; where it does, the Taxable Person may deduct the higher of the de minimis and the published proportion of EBITDA. It does not apply at all to a Bank, an Insurance Provider, a natural person undertaking a Business in the State, or any other Person the Minister determines. A disallowed amount may be carried forward to a published number of subsequent Tax Periods, in the order incurred.

The main limit on interest deductions. Article 29 allows interest notwithstanding Article 28(2)(b); this article then caps it. The output is the deductible Net Interest Expenditure and the amount disallowed and carried forward.

The mechanism, and the parts easy to miss

Article 30 has seven clauses. Four of them change the answer in ways a naive reading does not.

30(6) — Persons the limitation does not apply to at all

Tested first. Computing a cap for an excluded Person and reporting it as met would read as a test passed rather than a test that never applied.

  • (a) A Bank
  • (b) An Insurance Provider
  • (c) A natural person undertaking a Business or Business Activity in the State
  • (d) Any other Person as may be determined by the Minister

30(3) and MD 126 of 2023 Article 8 — the de minimis is a floor, not a cliff

Where Net Interest Expenditure does not exceed the de minimis, the limitation does not apply to the period. Where it does exceed it, Article 8(2) of the Decision lets the Taxable Person deduct the HIGHER of the de minimis and the proportion of EBITDA — so a company with little or no EBITDA still deducts up to the de minimis. Article 8(3) pro-rates the de minimis for a Tax Period longer or shorter than twelve months.

30(2) — what Net Interest Expenditure is

  • Interest expenditure incurred during the Tax Period
  • Plus any Net Interest Expenditure carried forward under Clause 4
  • Less taxable Interest income derived during the same period
  • Interest disallowed under any other provision of the Decree-Law is excluded from the calculation (Clause 5)

30(1) — what the cap is a proportion of

Article 9 of MD 126 of 2023 fixes the figure: Taxable Income under Article 20 (so already excluding Exempt Income) with Net Interest Expenditure and the depreciation and amortisation taken into account added back, together with interest on liabilities agreed before 9 December 2022, and never less than nil. It is a tax figure, not accounting EBITDA.

What counts as Interest, and what is carved out — MD 126 of 2023

  • Interest includes the interest component of financial instruments, financing fees (guarantee, arrangement, commitment), the finance element of finance and non-finance leases, the interest-equivalent on Islamic financial instruments, and foreign exchange movements on interest (Articles 2 to 6)
  • Net Interest Expenditure on debt whose terms were agreed before 9 December 2022 is outside the rule (Article 11)
  • Net Interest Expenditure of a Qualifying Infrastructure Project is outside the rule (Article 14)
  • These carve-outs are made in the figures supplied, and the interest question says so

30(4) — the carried-forward amount

A disallowed amount may be carried forward to a published number of subsequent Tax Periods, in the order in which it was incurred, subject to Clauses 1 and 2 in each of those periods.

Order of testing

  1. 1

    Inputs requiring your determination

    Any input a person must decide and has not decided stops the computation. The figures are asked for only once the Person is inside the rule — asking a Bank for its EBITDA would be asking for a number nothing will use.

  2. 2

    Persons to whom the limitation does not apply

    Article 30(6). Outside Clauses 1 to 5 entirely, so no cap is computed and none is met. Article 31 and Article 28 still apply.

  3. 3

    De minimis for Net Interest Expenditure

    Article 30(3), tested before the cap. At or below the published amount, pro-rated for a period that is not twelve months, the limitation does not apply to the period.

  4. 4

    Cap on Net Interest Expenditure

    The higher of the published proportion of adjusted EBITDA and the de minimis (MD 126 of 2023, Article 8(2)). Within it, the whole amount is deductible; above it, the excess is disallowed and carried forward for the published number of periods.

Examples

Illustrative scenarios — ours, not the authority’s — each computed live by this rule. Change any fact and the outcome is the rule’s, not a hand-written answer.

Net interest above the cap

A leveraged group company with interest expenditure of AED 40,000,000, interest income of AED 2,000,000, nothing carried forward, and adjusted EBITDA of AED 90,000,000.

Computed

Net Interest Expenditure of AED 38,000,000 exceeds the cap as computed for FY2026: the cap is 30% of adjusted EBITDA of AED 90,000,000, being AED 27,000,000, which exceeds the de minimis of AED 12,000,000. So AED 27,000,000 is deductible and AED 11,000,000 is disallowed. Article 30(4) allows the disallowed amount to be carried forward to the subsequent 10 Tax Periods, in the order incurred, based on the figures you supplied.

Workings

Interest expenditure incurredArticle 30(2) — as supplied
AED 40,000,000
Net Interest Expenditure carried forwardnone supplied
AED 0
Taxable Interest income derivedArticle 30(2) — netted against the expenditure
(AED 2,000,000)
Net Interest ExpenditureArticle 30(2)
AED 38,000,000
Adjusted EBITDAMD 126 of 2023 Article 9 — Taxable Income with Net Interest Expenditure, depreciation and amortisation added back
AED 90,000,000
Proportion appliedArticle 30(1) — published value for FY2026
30%
Proportion of adjusted EBITDAArticle 30(1)
AED 27,000,000
De minimis for the periodArticle 30(3), MD 126 of 2023 Article 8 — published value for FY2026
AED 12,000,000
Cap on deductible Net Interest ExpenditureMD 126 of 2023 Article 8(2) — the higher of the two, here the EBITDA proportion
AED 27,000,000
Deductible Net Interest ExpenditureArticle 30(1) — limited to the cap
AED 27,000,000
Disallowed and carried forwardArticle 30(4) — deductible in the subsequent 10 Tax Periods, in the order incurred
AED 11,000,000

Decided by the cap on net interest expenditure

A brought-forward amount pushes the period over the cap

The same company the following year: interest expenditure of AED 20,000,000, interest income of AED 1,000,000, and AED 11,000,000 of Net Interest Expenditure carried forward, against adjusted EBITDA of AED 80,000,000.

Computed

Net Interest Expenditure of AED 30,000,000 exceeds the cap as computed for FY2026: the cap is 30% of adjusted EBITDA of AED 80,000,000, being AED 24,000,000, which exceeds the de minimis of AED 12,000,000. So AED 24,000,000 is deductible and AED 6,000,000 is disallowed. Article 30(4) allows the disallowed amount to be carried forward to the subsequent 10 Tax Periods, in the order incurred, based on the figures you supplied.

Workings

Interest expenditure incurredArticle 30(2) — as supplied
AED 20,000,000
Net Interest Expenditure carried forwardArticle 30(2) and 30(4) — from earlier periods
AED 11,000,000
Taxable Interest income derivedArticle 30(2) — netted against the expenditure
(AED 1,000,000)
Net Interest ExpenditureArticle 30(2)
AED 30,000,000
Adjusted EBITDAMD 126 of 2023 Article 9 — Taxable Income with Net Interest Expenditure, depreciation and amortisation added back
AED 80,000,000
Proportion appliedArticle 30(1) — published value for FY2026
30%
Proportion of adjusted EBITDAArticle 30(1)
AED 24,000,000
De minimis for the periodArticle 30(3), MD 126 of 2023 Article 8 — published value for FY2026
AED 12,000,000
Cap on deductible Net Interest ExpenditureMD 126 of 2023 Article 8(2) — the higher of the two, here the EBITDA proportion
AED 24,000,000
Deductible Net Interest ExpenditureArticle 30(1) — limited to the cap
AED 24,000,000
Disallowed and carried forwardArticle 30(4) — deductible in the subsequent 10 Tax Periods, in the order incurred
AED 6,000,000

Decided by the cap on net interest expenditure

A loss-making period

A company with net interest of AED 15,000,000 and an adjusted EBITDA loss of AED 5,000,000. EBITDA is taken as nil, so the proportion of it is nil — but the de minimis still allows AED 12,000,000.

Computed

Net Interest Expenditure of AED 15,000,000 exceeds the cap as computed for FY2026: the cap is the de minimis of AED 12,000,000, which exceeds 30% of adjusted EBITDA of AED 0 and so governs under Article 8(2) of Ministerial Decision No. 126 of 2023. So AED 12,000,000 is deductible and AED 3,000,000 is disallowed. Article 30(4) allows the disallowed amount to be carried forward to the subsequent 10 Tax Periods, in the order incurred, based on the figures you supplied.

Workings

Interest expenditure incurredArticle 30(2) — as supplied
AED 15,000,000
Net Interest Expenditure carried forwardnone supplied
AED 0
Taxable Interest income derivedArticle 30(2) — netted against the expenditure
AED 0
Net Interest ExpenditureArticle 30(2)
AED 15,000,000
Adjusted EBITDAnil — MD 126 of 2023 Article 9(1) takes the greater of nil and the computed figure
AED 0
Proportion appliedArticle 30(1) — published value for FY2026
30%
Proportion of adjusted EBITDAArticle 30(1)
AED 0
De minimis for the periodArticle 30(3), MD 126 of 2023 Article 8 — published value for FY2026
AED 12,000,000
Cap on deductible Net Interest ExpenditureMD 126 of 2023 Article 8(2) — the higher of the two, here the de minimis
AED 12,000,000
Deductible Net Interest ExpenditureArticle 30(1) — limited to the cap
AED 12,000,000
Disallowed and carried forwardArticle 30(4) — deductible in the subsequent 10 Tax Periods, in the order incurred
AED 3,000,000

Decided by the cap on net interest expenditure

A bank

A Bank with substantial net interest expenditure, which Article 30(6)(a) puts outside Clauses 1 to 5 entirely.

Computed

The general interest deduction limitation does not apply as computed: Article 30(6)(a) — a Bank. Article 30(6) puts such a Person outside Clauses 1 to 5, so no cap is computed and none is met. The specific limitation in Article 31 and the general rule in Article 28 still apply.

Decided by the persons to whom the limitation does not apply

Try it

Supply the facts and this rule computes the outcome in your browser, live. Leave a determination undecided and it blocks the result — it is never read as a no.

Not computed yet

1 input still need your determination:

  • Is the Taxable Person a Bank, an Insurance Provider, a natural person undertaking a Business in the State, or a Person the Minister has determined to be outside this rule?

Computed in your browser from the figures you supply. Nothing is sent anywhere, and the result is a computation against a rule — reference, not tax advice.

Thresholds

uae.interest_limitation_ebitda_percentage
30% · reviewed 2026-09-28 · source
uae.interest_limitation_de_minimis
AED 12,000,000 · reviewed 2026-09-28 · source
uae.interest_limitation_carry_forward_periods
count 10 · reviewed 2026-09-28 · source

Threshold values are published separately from the rule and carried with a citation. Where none has been published for the period being computed, the rule reports that rather than applying a default.

Sources

Share this rule

Reference, not tax advice.

Pankaj Agarwal — Tax Technology Leader