The United Arab Emirates (UAE) will enforce a 15% minimum top-up tax on large multinational corporations starting January 2025, the Finance Ministry announced on Monday. The move aligns with the OECD’s global minimum corporate tax agreement, designed to ensure multinational enterprises pay a minimum effective tax rate and curb tax avoidance practices.
Who Does It Apply To?
The Domestic Minimum Top-Up Tax (DMTT) will apply to companies with global consolidated revenues of €750 million ($793.50 million) or more in at least two of the four financial years preceding the year the tax is enforced.
This initiative follows the UAE’s introduction of a 9% corporate tax in 2023, which largely excluded free zones, and reflects the country’s strategy to diversify away from oil revenues while maintaining its position as a hub for multinational enterprises.
Incentives for Economic Growth
To complement the new tax regime, the UAE Finance Ministry has proposed a range of corporate tax incentives, subject to legislative approval:
- R&D Tax Incentive (2026 Onwards):
Companies could benefit from a 30%-50% refundable tax credit based on their operations’ scale and revenue within the UAE. - Employment-Based Incentives (2025 Onwards):
A refundable tax credit linked to high-value employment activities, calculated as a percentage of eligible employee income costs.
The Finance Ministry aims to use these incentives to foster innovation and attract high-value business operations, ensuring the UAE remains competitive despite the increased tax burden.
Part of a Global Tax Revolution
The UAE’s adoption of the OECD’s Two-Pillar Solution positions it among 136 nations working to create a fairer global tax environment. By enforcing the minimum 15% tax rate, the UAE ensures compliance with international tax frameworks while addressing concerns about tax avoidance.
Economic Implications
The tax amendments could reshape how multinationals operate in the UAE. While free zones retain their economic advantages, companies outside these zones will face higher tax obligations. The additional incentives, however, signal the government’s intent to offset potential disadvantages by promoting innovation-driven sectors and job creation.
