15 July 2026 · How To
Calculating the 30% EBITDA Cap
Calculating the 30% EBITDA cap is a four-step process: work out tax-adjusted EBITDA (broadly, taxable income before net interest expenditure and depreciation/amortisation, with exempt income excluded), take 30% of that figure, compare it against the AED 12 million de-minimis and take whichever is higher as your cap, then compare the cap to your actual Net Interest Expenditure. Anything above the cap is disallowed for the period and carried forward. Because tax-adjusted EBITDA strips out exempt income, it can be meaningfully smaller than your accounting EBITDA — so the calculation has to start from the tax base, not the management accounts.
Exiloz Management & Tax Consultant · Dubai-based FTA-focused advisory · VAT, corporate tax & accounting
Build the cap
Start with tax-adjusted EBITDA: taxable income for the period before net interest expenditure and before depreciation or amortisation, with any exempt income — such as qualifying dividends or participation-exemption gains — excluded from the base. Take 30% of that figure, then compare it to the AED 12 million de-minimis. Your cap for the period is whichever of the two numbers is higher, and that is the figure your actual net interest gets measured against.
- Begin from taxable income, not accounting profit, before net interest and depreciation/amortisation.
- Strip out exempt income before calculating the 30% figure — this can shrink EBITDA significantly for holding structures.
- Multiply tax-adjusted EBITDA by 30% to get the EBITDA-based cap.
- Compare that figure to the AED 12 million de-minimis.
- Your actual cap is the higher of the two — never assume it is automatically the 30% figure.
- Recompute every tax period; EBITDA and net interest both move year to year.
Find the deductible amount
With the cap established, compare it to your actual Net Interest Expenditure for the period. Interest up to the cap is deductible as normal; anything above it is disallowed for the current period. That excess is not lost — it is carried forward and can be deducted in a future period once you have headroom under a higher cap or lower net interest — but only if the disallowed amount and the workings behind it are properly recorded.
- Deduct net interest up to the cap; nothing above it is deductible this period.
- Disallow and record the exact excess amount.
- Carry the excess forward for up to ten tax periods.
- Keep the full EBITDA, cap and comparison workings on file for the FTA.
- A one-off large transaction can distort EBITDA — check for that before relying on the 30% figure.
The calculation in numbers
Take a Dubai business with tax-adjusted EBITDA of AED 30,000,000. Thirty percent of that is AED 9,000,000 — but the AED 12,000,000 de-minimis is higher, so the cap for the period is AED 12,000,000. If actual net interest is AED 10,000,000, all of it is deductible because it sits below the AED 12 million de-minimis regardless of the 30% figure. Now take a more leveraged business: tax-adjusted EBITDA of AED 60,000,000 and net interest of AED 25,000,000. Thirty percent of EBITDA is AED 18,000,000, which beats the AED 12 million de-minimis, so the cap is AED 18,000,000. Actual net interest of AED 25,000,000 exceeds that cap by AED 7,000,000 — that amount is disallowed this period and carried forward. At the 9% corporate tax rate, AED 7 million of disallowed interest can mean up to AED 630,000 of additional tax in the current period, recoverable only if the carry-forward is used correctly in a later year.
- The higher of 30% of EBITDA and AED 12 million always wins — never assume it is the 30% figure.
- A cap of AED 18 million against AED 25 million of net interest disallows AED 7 million.
- Disallowed interest has a real cash-tax cost in the current period, even though it is not permanently lost.
- Rerun the calculation every period — the same business can have a very different cap the following year.
What changes when EBITDA moves
Tax-adjusted EBITDA is not static, and neither is the cap it produces. If the same leveraged business grows its EBITDA to AED 80,000,000 the following period while net interest falls to AED 20,000,000, its cap becomes AED 24,000,000 (30% of AED 80,000,000) — comfortably above both the AED 12 million de-minimis and its actual net interest. That period, all current-period interest is deductible, and there is AED 4,000,000 of headroom left to absorb part of the AED 7,000,000 carried forward from the prior period, leaving AED 3,000,000 still to carry on.
- A rising EBITDA and falling net interest can create headroom to absorb prior-period disallowances.
- Headroom is used first against current-period interest, then against the carried-forward balance.
- Model next period likely EBITDA and net interest before assuming a carry-forward will be usable.
- Track the carry-forward as a running balance across periods, not a single lump sum.
Frequently Asked Questions
Running the 30% calculation correctly comes down to a handful of recurring questions — here is what Dubai businesses ask us most.
What is tax-adjusted EBITDA?
Broadly, your taxable income for the tax period before net interest expenditure and before depreciation or amortisation, with exempt income excluded from the base. It is a tax-law figure, not your accounting EBITDA, so the two can differ meaningfully — particularly where exempt dividends or participation-exemption gains are involved.
Do I use 30% or AED 12m?
You use whichever produces the higher cap: 30% of tax-adjusted EBITDA or AED 12 million. There is no election involved — the higher figure automatically applies as your deductible cap for the period.
What if 30% of EBITDA is below AED 12m?
Then the AED 12 million de-minimis applies as your cap instead, protecting a larger deduction than the EBITDA-based figure alone would allow. This is common for businesses with modest EBITDA relative to their borrowing.
Can Exiloz run the calculation?
Yes. We compute your tax-adjusted EBITDA, the resulting cap, the comparison against your actual net interest, and the deductible and disallowed amounts, with full workings kept ready for the FTA.
Why can accounting EBITDA and tax-adjusted EBITDA differ so much?
Because exempt income — such as qualifying dividends or participation-exemption gains — is excluded from the tax base but often included in accounting profit. A holding company with significant exempt income can see its tax-adjusted EBITDA come out far lower than its management accounts suggest, shrinking the 30% figure.
Does a one-off gain or loss distort the calculation?
It can. An unusual one-off item in taxable income before interest and depreciation will flow into tax-adjusted EBITDA and can temporarily inflate or deflate the 30% figure, so it is worth reviewing whether any one-off items should be adjusted for before relying on the result.
How much tax is actually at stake if interest is disallowed?
At the 9% corporate tax rate, every AED 1 million of disallowed net interest represents up to AED 90,000 of additional current-period tax, though the amount is generally recoverable through the carry-forward once headroom exists in a future period.
Should I recalculate the cap every single tax period?
Yes. Both tax-adjusted EBITDA and Net Interest Expenditure typically change period to period, so a cap that comfortably covers your interest this year is not guaranteed to do so next year.
Run your 30% EBITDA cap calculation
Exiloz calculates your tax-adjusted EBITDA, applies the higher-of test against the AED 12 million de-minimis, and shows you the exact deductible and disallowed interest for the period, with full supporting workings.