Deductible Expenditures

• Expenditure incurred wholly and exclusively for the purposes of the Taxable Person’s Business.
• If expenditure is incurred for more than one purpose, then proportionate deduction incurred for the purposes of deriving Taxable Income. (Expenditures incurred on Exempt Income will not be considered).
• Borrowing Cost if capitalized in accordance with accounting standards.
• Amounts Incurred in connection with raising finance shall be considered as Interest expense. These include Guarantee fees, arrangement fees & Commitment fees.
• Interest Expenses Incurred on;
• Performing & Non performing debts,
• Investment schemes,
• Asset back debt securities,
• Futures, Forward Contract
• Options, Interest rate & Foreign exchange swap agreements & financial derivatives
• Lease/Hire Purchase,
• Factoring,
• Repo, Reverse Repo transactions,
• Inter Company Loans.
• Financial Islamic instrument,
• Finance element of Finance/Non-Finance Lease.
• Foreign Exchange gains/Losses Accruing on interest.
• Interest expenses incurred on debt agreements entered prior to 09^th December 2022 shall be allowed on Actual Basis I.e. Net Interest Expenditure arising on debt instrument.
• De Minimis Net Interest Expenditure Rule to be followed on debt agreement’s entered after 09^th December 2022 which is as under;
• Where the Net Interest Expenditure does not exceed AED 12 Mn, then Actual Net Interest Expenditure.
• Where the Net Interest Expenditure exceeds 30% of Accounting Earnings before Interest, Taxes, Depreciation & Amortization (EBITDA) then, Higher of AED 12 Mn or 30% of (EBITDA).
• The amount of Net Interest Expenditure disallowed may be carried forward and deducted in the subsequent (10) ten Tax Periods in the order in which the amount was incurred.
• Accounting Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) = Taxable Income + Depreciation + Amortization + Any Interest Income or Expenditure relating to assets /liabilities held prior to Dec 2022.
• Net Interest Expenditure includes Interest expenditure during the year and Interest expenditure carried forward Less Interest Income