UAE announces 15% Domestic Minimum Top-up Tax

The UAE is going to implement Minimum Tax on Multinational Enterprises (MNEs) companies operating in the Emirates of UAE. This is being done in line with UAE’s commitment to implement the Organization for Economic Co-operation and Development’s (OECD) BEPS Pillar Two Action plan which requires MNEs to pay a minimum effective tax rate of 15% on their profits in every country where they operate. This announcement was made recently, on 9 December 2024 by the UAE’s Ministry of Finance. The Ministry had earlier in year 2023 introduced the concept of Top up Tax by making amendments in the Federal Decree-Law No. 47 of 2022 titled “Taxation of Corporations and Businesses”. Later in March 2024 a public consultation document containing framework of Minimum Tax was issued in the UAE seeking inputs and comments from businesses, stakeholders etc., which now follows this announcement last week. The DMTT is expected to be effective for financial years starting on or after January 1, 2025 and will empower UAE to preserve the primary right of taxation over profits derived from UAE. Further details on the legislation regulating this tax will be issued by the Ministry of Finance in due course.

This strategic step also reflects the UAE’s commitment of establishing a fair and transparent tax system aligned with global standards. The DMTT will apply to MNE’s operating in the Emirates of the UAE with consolidated global revenues of €750 million or more in at least two out of the four financial years immediately preceding the financial year in which the DMTT applies. The UAE’s implementation of the DMTT will closely align with the OECD’s GloBE Model Rules.

In addition, to promote sustainable growth, innovation, and investment, the Ministry of Finance is currently considering the introduction of certain Corporate Tax Incentives as well under Federal Decree-Law No. 47 of 2022 such as a Research and Development (R&D) Tax Incentive to encourage R&D activities, foster innovation and economic growth within the UAE and a refundable tax credit for high-value employment activities. The exact legislation and the date of implementation is yet to be notified. The final form and implementation of the above-mentioned proposed incentives, are subject to legislative approvals. Hence, it is recommend to monitor developments in this regard on a continuous basis.