The Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, (“the UAE Corporate Tax Law”) has brought significant changes to the commercial landscape in the United Arab Emirates. One key aspect of the law is the treatment of interest deductions for businesses operating in the UAE.  In this article, we will delve into the definition of interest under the UAE Corporate Tax Law, explore the general interest deduction limitation rule for Islamic Financial instruments, and examine specific interest deduction limitation rules for related party transactions. The UAE Corporate Tax Law came into force on 1 June 2023 and is applicable to businesses in the UAE for the financial years commencing on or after 1 June 2023.   

Which way is the Right way? Businesses employ various methods to manage financing for their ventures. Here are some common approaches: