A loan between two companies under the same owner — is the interest on it even deductible?

Loans between companies within the same group look simple on the books, but tax-wise they go through more than one layer of scrutiny. First, the interest rate itself must sit at arm's length — the rate the loan would have carried had it been made to a genuinely independent party, not a nominal or inflated rate designed to shift profit between the two entities.

Even with the right rate, two further rules can restrict the deduction. The general rule (Article 30) caps deductible net interest at the higher of AED 12 million or 30% of adjusted EBITDA, with any excess potentially carried forward to future periods under certain conditions. The specific rule (Article 31) blocks the interest deduction entirely where a related-party loan financed a dividend distribution, a capital reduction or share buyback, a capital contribution to a related party, or the acquisition of an ownership interest in a person who becomes related — unless the company can show the loan's main purpose wasn't a Corporate Tax advantage, or that the related party already pays tax on that income at a rate equal to or above the UAE Corporate Tax rate.

RASEEKH reviews intra-group financing structures, confirms the interest rate is documented on an arm's-length basis, checks the financing doesn't fall under the Article 31 restrictions, and makes sure any excess above the general cap is correctly computed and carried forward — before it becomes a point of review by the tax authority.