Refer to the UAE corporate tax law to answer the following : Piano LLC incorporated in the UAE as a trading company in 20X3. Its first tax year ended on 31 March 20X4 It has profit before tax for the year ended 31 March 20X4 of AED 50,000,000, interest income of AED 6,400,000 and interest expense of AED 55,420,000. Its EBITDA for the year ended 31 March 20X4 is AED 120,000,000 The only adjustments that you are required to make to calculate taxable income are those related to interest deductions No credits or reliefs are available. How much disallowed interest expense is being carried forward on 1 April 20X5?

As of my knowledge cutoff in early 2023, the United Arab Emirates (UAE) had announced plans to introduce a federal corporate tax on business profits effective for financial years starting on or after June 1, 2023. However, the specific details of the law, including rules regarding interest deductions and any limitations on them, were not fully detailed in public sources at that time. In many tax jurisdictions, there are rules that limit the deductibility of interest expenses to prevent base erosion and profit shifting (BEPS). These rules often cap the amount of interest that can be deducted based on a percentage of the company's earnings before interest, taxes, depreciation, and amortization (EBITDA). For example, if the UAE were to adopt a rule similar to the one in the United States or other OECD countries, it might limit the interest deduction to a certain percentage of EBITDA. A common threshold is 30% of EBITDA. If we apply this hypothetical rule to your scenario: EBITDA for the year ended 31 March 20X4: AED 120,000,000 Hypothetical interest deduction cap (30% of EBITDA): AED 120,000,000 * 30% = AED 36,000,000 Since the company has interest expenses of AED 55,420,000, and assuming a 30% cap applies: Deductible interest expense: AED 36,000

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