Interest Deduction Limitation Rules

1. Glossary

2. Introduction

1. 2.1. Overview

2. 2.2. Purpose of this guide

3. 2.3. Who should read this guide?

4. 2.4. How to use this guide

5. 2.5. Legislative references

6. 2.6. Status of this guide

3. Meaning of Interest

1. 3.1. Overview

   1. 3.1.1. What is “Interest”?

   2. 3.1.2. Timing of recognition

2. 3.2. Amount accrued or paid for use of money or credit

3. 3.3. Discounts and premiums

4. 3.4. Payments made in respect of Islamic Financial Instruments

5. 3.5. Payments economically equivalent to Interest

   1. 3.5.1. Performing and non-performing debt instruments

   2. 3.5.2. Interest held in collective investment schemes that primarily invest in cash and cash equivalents

   3. 3.5.3. Collateralised asset-backed debt securities

   4. 3.5.4. Sale and subsequent repurchase agreement (repo)

   5. 3.5.5. Stock lending agreement

   6. 3.5.6. Securitisation involving transfer of assets in exchange for securities

   7. 3.5.7. Hire purchase and finance leases

   8. 3.5.8. Non-finance leases

   9. 3.5.9. Factoring and similar transactions

6. 3.6. Foreign exchange movements

7. 3.7. Capitalised Interest

8. 3.8. Hybrid instruments

9. 3.9. Late payments

   1. 3.9.1. In relation to statutory dues

   2. 3.9.2. In relation to commercial dues

10. 3.10. Amounts incurred in connection with the raising of finance

    1. 3.10.1. Derivative contracts

11. 3.11. Disposal, sale or transfer

4. Deductible Interest expenditure

1. 4.1. Overview

2. 4.2. General principles of deductibility of expenditure

   1. 4.2.1. Expenditure not incurred for the purposes of the Taxable Person’s Business

   2. 4.2.2. Expenditure that is capital in nature

   3. 4.2.3. Interest expenditure related to deriving Exempt Income

3. 4.3. Interest expenditure due to Connected Persons and/or Related Parties

5. Specific Interest Deduction Limitation Rule

1. 5.1. Overview

2. 5.2. Non-deductibility of Interest expenditure

3. 5.3. Main purpose test

   1. 5.3.1. Presumption of no Corporate Tax advantage for Non-Residents

6. General Interest Deduction Limitation Rule

1. 6.1. Overview

2. 6.2. The General Interest Deduction Limitation Rule

3. 6.3. Calculation of Net Interest Expenditure

4. 6.4. Calculation of 30% of adjusted EBITDA

7. Special cases

1. 7.1. Exempt Persons

2. 7.2. Non-Resident Persons

   1. 7.2.1. Overview

   2. 7.2.2. “Interrupted” Permanent Establishment or nexus

3. 7.3. Cash Basis of Accounting

   1. 7.3.1. Overview

   2. 7.3.2. Interplay with General Interest Deduction Limitation Rule

8. Exceptions to General Interest Deduction Limitation Rule

1. 8.1. Overview

2. 8.2. Banks and Insurance Providers

3. 8.3. Natural person undertaking Business or Business Activity in the UAE

4. 8.4. Historical Financial Liabilities

5. 8.5. Qualifying Infrastructure Projects

   1. 8.5.1. Overview

   2. 8.5.2. Qualifying Infrastructure Project Person

   3. 8.5.3. Qualifying Infrastructure Project

   4. 8.5.4. Qualifying Infrastructure Project Person executing multiple projects

6. 8.6. Small Business Relief

9. Updates and Amendments