How much interest expense is deductible for UAE corporate tax?
Net interest expenditure up to 30% of EBITDA. Article 30 of Federal Decree-Law No. 47 of 2022 caps the deduction at 30% of accounting earnings before interest, tax, depreciation and amortisation, unless net interest is below an amount the Minister sets. Interest disallowed can be carried forward and deducted in the next ten tax periods.
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Why contractors meet this
Contractors fund working capital with overdrafts, trust receipts and loans while waiting for certificates and retention. A contractor with heavy borrowing and thin margins can find part of its interest disallowed in a weak year.
Small business relief years
Net interest expenditure incurred in a year where small business relief is elected cannot be carried forward.
How SupaJack Construct helps
The tax module calculates corporate tax on taxable income with the AED 375,000 zero band and 9% above it, and treats client entertainment as 50% non-deductible. Taxable income starts from the ledger the projects post to, so job costs, certificates and payroll already sit in the accounts.
Related tools and guides
See the answers on the corporate tax rate, small business relief, the corporate tax return deadline, carrying tax losses forward and whether fines are deductible, plus finance and VAT in SupaJack Construct, the VAT guide for contractors and the construction accounting software page.
Worked example
A contractor has EBITDA of AED 3,000,000 and net interest of AED 1,200,000. The cap is AED 900,000. AED 300,000 is disallowed this year and carried forward to be deducted within the next ten periods, subject to the same cap.
Questions people ask
What is the cap?
30% of EBITDA.
How long can disallowed interest be carried?
Ten subsequent tax periods.
Is there a small-amount exemption?
Yes, below an amount set by the Minister.