Certainly, the threshold is set at AED 12 million. Consequently, if a Taxable Person’s Net Interest Expenditure, which is the difference between Interest expenditure incurred and Interest income received, falls below AED 12 million for a given Tax Period, they are exempt from the application of the General Interest Deduction Limitation Rule during that Tax Period. In such cases, the Taxable Person is entitled to fully deduct all their Interest expenditure for that specific Tax Period.

For instance, let’s consider Company A’s scenario. In a particular Tax Period, Company A accrues Interest income amounting to AED 4 million and incurs Interest expenditure totaling AED 18 million. This results in Company A having Net Interest Expenditure of AED 14 million for the Tax Period. Furthermore, Company A’s adjusted earnings before Interest, taxes, depreciation, and amortization (EBITDA) for the Tax Period stands at AED 30 million.

In this instance, Company A’s Net Interest Expenditure surpasses the de minimis threshold of AED 12 million for the Tax Period. Pursuant to the provisions outlined in Article 8(1) and (2) of Ministerial Decision No. 126 of 2023, Company A is eligible to deduct the higher of AED 12 million or 30% of their adjusted EBITDA. Calculating 30% of their adjusted EBITDA of AED 30 million, we arrive at AED 9 million.

Hence, for the Tax Period, Company A can deduct AED 12 million of their Net Interest Expenditure, while AED 2 million of their Net Interest Expenditure is deemed non-deductible. This unallowed amount can be carried forward and deducted in the subsequent 10 Tax Periods, contingent upon fulfilling the requisite conditions.