UAE to impose 15% minimum top-up tax on multinationals from January

The UAE will impose a minimum top-up tax of 15% on large multinational companies operating in the country starting in January, the finance ministry said on Monday as the government seeks to boost non-oil revenue.

The UAE Ministry of Finance has announced updates in relation to certain provisions of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.

These amendments include introduction of a Domestic Minimum Top-up Tax (DMTT), and tax incentives to support growth and innovation.

— Introduction of a Domestic Minimum Top-up Tax (DMTT):

Following the issuance of Federal Decree Law No. 60 of 2023, a Domestic Minimum Top-up Tax (DMTT) will be effective in the UAE for financial years starting on or after Jan.1, 2025. This strategic step reflects the UAE's commitment to implementing the Organisation for Economic Co-operation and Development's (OECD) Two-Pillar Solution, aimed at establishing a fair and transparent tax system aligned with global standards.

The Pillar Two rules require large multinational enterprises (MNEs) to pay a minimum effective tax rate of 15% on profits in every country where they operate.

The DMTT will apply to multinational enterprises operating in 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.

Further details on this legislation will be issued by the Ministry of Finance in due course.

— Tax Incentives to Support Growth and Innovation:

The UAE continues to enhance its business-friendly environment, reflecting its commitment to national strategic objectives such as strengthening economic competitiveness and improving ease of doing business.

The DMTT is part of the OECD's global minimum corporate tax agreement which has 136 signatories, including the UAE, to ensure big companies pay a minimum 15% and to make tax avoidance harder.

The UAE, including Dubai, is a hub for multinationals in the Middle East and the tax amendments come a year after the UAE began rolling out a 9% business tax, with exemptions for the many free zones which power its economy.

The UAE's finance ministry said it is also considering introducing a number of corporate tax incentives, including one for research and development (R&D) that would apply for tax periods starting in 2026.

The expenditure-based incentive would offer a potential 30%-50% refundable tax credit depending on the size of the company's operations in the UAE and revenue, the ministry added.

A refundable tax credit for high-value employment activities that would be granted to companies as a percentage of eligible income costs for employees is also being considered and could be applied as early as Jan. 1 2025, the ministry said.

Such proposed incentives remain subject to legislative approval.

WAM / Agence France-Presse