GTL Summary:

This article provides a targeted anti-avoidance rule for related-party financing. It disallows a deduction for interest expenditure on a loan from a Related Party if the funds are used for specific transactions, such as paying a dividend, repurchasing shares, or making a capital contribution to another Related Party. An exception applies if the taxpayer can demonstrate the main purpose was not to gain a Corporate Tax advantage. A tax advantage is not considered to arise if the Related Party receiving the interest is subject to tax on that income at a rate of 9% or higher.

Document Type: Tax Law Article
Law: CIT (FDL No 47 of 2022, as amended)
Article Number: 31
Country: 🇦🇪 UAE
Location: Chapter 9 - Deductions
Order: 31
Last updated at: 2025-11-04 11:19:40 UTC

Chapter 9 - Deductions

Article 31 - Specific Interest Deduction Limitation Rule

  1. No deduction shall be allowed for Interest expenditure incurred on a loan obtained, directly or indirectly, from a Related Party in respect of any of the following transactions:

    1. A dividend or profit distribution to a Related Party.

    2. A redemption, repurchase, reduction or return of share capital to a Related Party.

    3. A capital contribution to a Related Party.

    4. The acquisition of an ownership interest in a Person who is or becomes a Related Party following the acquisition.

  2. Clause 1 of this Article shall not apply where the Taxable Person can demonstrate that the main purpose of obtaining the loan and carrying out the transaction referred to under Clause 1 of this Article is not to gain a Corporate Tax advantage.

  3. For the purposes of Clause 2 of this Article, no Corporate Tax advantage shall be deemed to arise where the Related Party is subject to Corporate Tax or a tax of a similar character under the applicable legislation of a foreign jurisdiction on the Interest at a rate not less than the rate specified in paragraph (b) of Clause 1 of Article 3 of this Decree-Law.

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