UAE Corporate Tax: Net interest expenditure cap, tax grouping rules unveiled by Ministry of Finance

UAE Corporate Tax: Net interest expenditure cap, tax grouping rules unveiled by Ministry of Finance

Dubai: The maximum interest cap that can be deducted by businesses under the UAE Corporate Tax rules has been issued by the Ministry of Finance. Under this, the net interest expenditure that can be deducted is capped at the higher of 30 per cent of adjusted EBITDA. Or it can be a 'safe harbour' amount of Dh12 million. Tax groups with members who are banks and/or insurance providers must exclude these members' income and expenditure when determining the 30 per cent EBITDA threshold. The new rule - titled 'General Interest Deduction Limitation Rule' - sets out the maximum cap of interest that can be deducted by businesses that are not banks, insurance providers or natural persons (individuals) undertaking a business or business activity in the UAE. Long-term infrastructure projects that meeting relevant conditions will not face restrictions on interest expenditure deductibility under the Rule. Interest incurred on debt instruments entered into before the Law was published to the general public on December 9, 2022 will not be subject to the limitation rule. UAE resident-entities that are 95 per cent or more commonly owned can form or join a 'tax group'. They will be treated as a single entity for corporate