The UAE has announced the implementation of a Domestic Minimum Top-up Tax (DMTT) targeting Multinational Enterprises (MNEs) operating within the country. This move aligns with the UAE’s commitment to the OECD’s Base Erosion and Profit Shifting (BEPS) Pillar Two initiative, which ensures that MNEs pay a minimum effective tax rate of 15% in each jurisdiction where they operate.
This announcement was made by the Ministry of Finance on 9 December 2024. Earlier, in 2023, the concept of a Top-up Tax was introduced through amendments to Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. This was followed by a public consultation in March 2024, where a proposed framework for the Minimum Tax was shared for feedback from businesses and stakeholders.
The DMTT will apply to financial years beginning on or after 1 January 2025. It is designed to safeguard the UAE’s taxing rights over income generated within the country and will apply to MNEs with consolidated global revenues of €750 million or more in at least two of the four financial years preceding the relevant financial year. The UAE’s approach will align closely with the OECD’s Global Anti-Base Erosion (Globe) Model Rules.
In parallel, the Ministry of Finance is also exploring additional corporate tax incentives under Federal Decree-Law No. 47 of 2022. These include a Research and Development (R&D) Tax Incentive aimed at promoting innovation and a refundable tax credit for high-value employment activities. The specific details and implementation timeline for these incentives will be announced following legislative approval.
Businesses are advised to stay updated on future developments to ensure timely compliance and to benefit from potential incentives.
