General Interest deduction limitation rule

General Interest deduction limitation rule

Under UAE CT Law

General Interest deduction limitation rule

General Interest Deduction Limitation Rule

Under UAE CT Law

On 30 May 2023, the Ministry of Finance issued Ministerial Decision No. 126 of 2023, providing a detailed guidance on the computation of deductions with respect to interest expenditure incurred by a taxable person. Below, we have highlighted the key elements of this Decision.

What is treated as interest?

  • Finance-related expenses
  • Finance elements of lease payments
  • Interest on Islamic financial instruments
  • Capitalized Interest
  • Forex gains/ losses on interest
  • Interest on financial derivative instruments

Interest deduction limitation

Ø Deductible interest expense

  • Deductible interest expense = Net interest expense * 30% of accounting EBITDA excluding exempt income or AED 12 million - whichever is higher.

Ø Net interest expense

  • Net interest expense = (Interest expense of the tax period + brought forward net interest expense)

De Minimis Rule

Ø > AED 12 million

  • Interest deduction limitation does not apply if the net interest expense exceeds AED 12 million.

Ø < AED 12 million

  • Net interest expense is fully deductible if below AED 12 million.


  • Banks
  • Insurance Provider
  • Natural Persons
  • Qualifying infrastructure projects

How can Crowe help?

  • Conduct an analysis of the current financing structure to assess the tax impact, identifying opportunities for deductions and credits available.
  • Advising on structuring financing arrangements to maximize tax benefits, minimizing tax liabilities under the relevant tax laws.
  • Advising on compliance and document maintenance related to interest deduction to ensuring adherence to the relevant regulations.

Contact Us

Markus Susilo
Markus Susilo
Partner- Payroll and Indirect Tax
Alessandro Valente
Alessandro Valente
Director - International Tax Service & Transfer Pricing