What Is the General Interest Deduction Limitation Rule?
The General Interest Deduction Limitation Rule (GIDLR) is set out in Article 30 of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. It limits how much interest a business can deduct when calculating its taxable income for UAE corporate tax purposes.
The core rule is simple: Net Interest Expenditure is deductible up to 30% of the taxable person’s adjusted EBITDA for the relevant tax period, excluding any exempt income under Article 22 of the Corporate Tax Law.
The rule was further detailed in Ministerial Decision No. 126 of 2023, issued on 30 May 2023, which defines the treatment of interest expense and income under the corporate tax framework. In April 2025, the FTA published a comprehensive guide (CTGIDL1) providing worked examples and clarifications.
The GIDLR aligns the UAE with international best practices, particularly the OECD BEPS Action 4 framework, which addresses base erosion through excessive interest deductions. Without this cap, businesses could load up on debt purely to increase deductions and reduce their tax liability.
💡 Why This Rule Matters for Your CT Filing
If your business has borrowings — whether bank loans, shareholder loans, Islamic finance facilities, or inter-company debt — you must check whether the GIDLR applies when preparing your corporate tax return. Getting it wrong means either claiming too much (triggering FTA penalties) or too little (overpaying tax).
The Two Key Thresholds
Article 30 creates a two-tier system that determines how much interest your business can deduct:
Threshold 1: The AED 12 Million Safe Harbour
If your Net Interest Expenditure for the tax period does not exceed AED 12,000,000, the 30% EBITDA limitation does not apply at all. You can deduct the full amount of your net interest costs without any restriction.
This means the vast majority of UAE SMEs and mid-market businesses are unaffected by the GIDLR — it only kicks in for businesses with substantial debt financing.
Threshold 2: The 30% EBITDA Cap
If your Net Interest Expenditure exceeds AED 12 million, you can deduct the greater of:
• AED 12,000,000 (the fixed minimum), or
• 30% of your adjusted EBITDA
Whichever figure is higher becomes your deduction cap. Any interest above this amount is disallowed for the current period but can be carried forward for up to 10 tax periods.
How to Calculate Adjusted EBITDA
Adjusted EBITDA under the UAE Corporate Tax Law is not the same as accounting EBITDA. It is calculated as follows:
| Step | Description |
|---|---|
| Start with | Taxable Income (before applying the GIDLR or any tax loss relief) |
| Add back | Net Interest Expenditure for the relevant tax period |
| Add back | Depreciation and amortisation expenditure used in calculating taxable income |
| Adjust for | Any interest on historical financial liabilities (pre-9 December 2022 loans, if election made) |
| Exclude | Any Exempt Income under Article 22 of the Corporate Tax Law |
| Result | Adjusted EBITDA (if negative, treated as AED 0) |
The 30% cap is then applied to this adjusted figure. If the result is less than AED 12 million, you still get the AED 12 million minimum deduction.
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Worked Example: How Article 30 Applies
Scenario 1: Below the AED 12M Threshold
Company A has Net Interest Expenditure of AED 8,000,000 for the tax period. Since this is below AED 12 million, the GIDLR does not apply. Company A deducts the full AED 8 million as a business expense. No further calculation is needed.
Scenario 2: Above AED 12M — EBITDA Cap Applies
| Item | Amount (AED) |
|---|---|
| Taxable Income (before GIDLR & loss relief) | 60,000,000 |
| Add: Net Interest Expenditure | 20,000,000 |
| Add: Depreciation & Amortisation | 10,000,000 |
| Adjusted EBITDA | 90,000,000 |
| 30% of Adjusted EBITDA | 27,000,000 |
| AED 12M minimum | 12,000,000 |
| Deductible Interest (greater of above) | 27,000,000 |
| Net Interest Expenditure | 20,000,000 |
| Disallowed (carried forward) | Nil (20M < 27M cap) |
Since the Net Interest Expenditure (AED 20M) is below the 30% EBITDA cap (AED 27M), the full amount is deductible.
Scenario 3: Disallowed Interest with Carry Forward
| Item | Amount (AED) |
|---|---|
| Taxable Income (before GIDLR) | 30,000,000 |
| Add: Net Interest Expenditure | 25,000,000 |
| Add: Depreciation & Amortisation | 5,000,000 |
| Adjusted EBITDA | 60,000,000 |
| 30% of Adjusted EBITDA | 18,000,000 |
| AED 12M minimum | 12,000,000 |
| Deductible Interest (greater of above) | 18,000,000 |
| Net Interest Expenditure | 25,000,000 |
| Disallowed — carried forward | 7,000,000 |
The AED 7 million disallowed interest can be carried forward and deducted in the next 10 tax periods, subject to the same GIDLR limitations in each future period.
What Counts as “Interest” Under the Corporate Tax Law?
The definition of interest under the UAE CT Law is broader than the IFRS definition. It includes:
Items Included in Net Interest Expenditure
• Any amount accrued or paid for the use of money or credit
• Interest on Islamic financial instruments compliant with Shari’a principles
• Interest component on forward contracts, futures, options, swaps, and other derivatives
• Guarantee fees, arrangement fees, commitment fees, and similar charges
• Finance costs on leases recognised under IFRS 16
• Discount/premium amortisation on financial instruments
• Amounts from repo agreements (sale and repurchase of securities)
• Any other amounts incurred in connection with raising finance
The 10-Year Carry Forward Rule
Any Net Interest Expenditure disallowed under Article 30 doesn’t disappear. It may be carried forward and deducted in the subsequent 10 tax periods, in the order in which the amount was originally incurred. This is a critical planning opportunity for businesses with cyclical earnings or heavy initial capital expenditure.
Key rules for carry forward:
• The carried forward interest is added to the current period’s Net Interest Expenditure when calculating the next year’s deduction
• The same 30% EBITDA / AED 12M limitation applies each year
• Oldest disallowed amounts are deducted first (FIFO basis)
• If not utilised within 10 years, the deduction is lost permanently
Proper tracking of carry-forward amounts is essential for accurate corporate tax filing. Our CT filing service maintains a carry-forward schedule for every client.
Who Is Exempt from Article 30?
| Category | Exempt from GIDLR? | Notes |
|---|---|---|
| Banks | Yes | Still subject to Article 31 & general deductibility |
| Insurance providers | Yes | Same as banks |
| Natural persons (sole traders) | Yes | Unless conducting business through a juridical person |
| Qualifying Infrastructure Projects | Yes | As defined in Ministerial Decision No. 126/2023 |
| Tax Groups with bank/insurer members | Partial | 30% EBITDA excludes income & expenses of bank/insurer members |
| All other taxable persons | No | GIDLR applies if Net Interest Expenditure > AED 12M |
Historical Financial Liabilities (Pre-9 December 2022)
Debt instruments where the terms were agreed before 9 December 2022 receive special treatment. The Net Interest Expenditure attributed to these “grandfathered” loans is exempt from the GIDLR, provided:
• The loan terms were fixed before 9 December 2022
• No material modifications have been made to the terms since that date
• The business maintains adequate documentation to support the historical nature of the liability
This exemption recognises that businesses entered these financing arrangements before the Corporate Tax Law was enacted and should not be retrospectively penalised.
Capitalised Interest: A Common Trap
When interest is capitalised as part of an asset’s cost (e.g., construction finance), it is not deductible in the year incurred because it is capital in nature. However, the interest portion is recovered through depreciation over the asset’s useful life.
For GIDLR purposes, only the relevant annual portion of capitalised interest (included in that year’s depreciation) is assessed against the 30% EBITDA cap. The depreciation add-back in the EBITDA calculation must be reduced by this recharacterised interest amount.
If the asset is disposed of before the capitalised interest has been fully depreciated, the remaining balance must be included in the Net Interest Expenditure calculation in the year of disposal.
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Article 30 vs Article 31: Understanding Both Rules
The UAE CT Law has two separate interest limitation rules that work together:
| Feature | Article 30 (General Rule) | Article 31 (Specific Rule) |
|---|---|---|
| Scope | All net interest expenditure | Related party interest only |
| Cap | 30% of adjusted EBITDA or AED 12M | Arm’s length principle |
| Order of application | Applied second | Applied first |
| Carry forward | 10 tax periods | No carry forward |
| Exemptions | Banks, insurers, natural persons, QIPs | None specified |
Application order: First, apply Article 31 to check if any related-party interest exceeds arm’s length amounts. Then, apply Article 30 to the remaining net interest expenditure against the 30% EBITDA cap. This order matters — interest already disallowed under Article 31 is excluded from the Article 30 calculation.
Common Mistakes When Applying the GIDLR
Based on our experience filing corporate tax returns for businesses across the UAE, these are the most frequent errors we see with Article 30:
❌ Mistakes to Avoid
• Forgetting to apply the cap when net interest exceeds AED 12 million
• Using accounting EBITDA instead of tax-adjusted EBITDA — the figures are different because depreciation, amortisation, and interest must be calculated per UAE tax rules, not IFRS
• Misclassifying capitalised interest — even when added to an asset’s cost, the interest component must be tracked separately
• Including already-disallowed interest — interest restricted under Article 31 or anti-avoidance rules must be excluded from the Article 30 calculation
• Not tracking carry-forward balances — disallowed amounts from prior years must be included in the current period’s calculation and utilised in the correct order (FIFO)
• Ignoring historical loan exemptions — pre-December 2022 loan interest may be excluded from the GIDLR, but only with proper documentation
Proper application of the GIDLR requires careful computation and documentation. Our corporate tax filing service includes full Article 30 analysis as part of every CT return for businesses with significant borrowings.