UAE Sets 15% Minimum Tax Rate for Multinationals - Effective January 2025

The United Arab Emirates (UAE) is set to introduce a new tax rule from January 1, 2025, affecting large multinational companies. The new rule, called the Domestic Minimum Top-Up Tax (DMTT), requires these companies to pay a minimum effective tax rate of 15% on their profits .

This move is part of the UAE's efforts to align its tax system with global standards and to prevent large multinationals from avoiding taxes by shifting their profits to low-tax jurisdictions. The UAE is committed to implementing the Organisation for Economic Co-operation and Development's (OECD) Two-Pillar Solution, which aims to establish a fair and transparent tax system.

Which Companies Will be Affected?

The Domestic Minimum Top-Up Tax (DMTT) will apply to multinational enterprises with consolidated global revenues of €750 million (approximately Dh3 billion) or more in at least two of the four financial years before the financial year in which the tax applies.

How will the DMTT work?

The DMTT will be calculated based on the company's global profits and the tax already paid in the UAE. If the company's effective tax rate is less than 15%, it will be required to pay the difference as a top-up tax.

Benefits of the DMTT

The introduction of the DMTT is expected to have several benefits, including:

• The DMTT is expected to generate significant tax revenue for the UAE government.
• The DMTT will require companies to disclose more information about their tax payments, making it easier to track tax evasion.
• The DMTT will ensure that all companies, regardless of their size or location, pay their fair share of taxes.

In addition to the Domestic Minimum Top-Up Tax (DMTT), the UAE Ministry of Finance is also considering introducing tax incentives to support growth and innovation. These incentives include a research and development tax credit and a high-value employment tax credit.