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

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