The United Arab Emirates (UAE) has long been recognized for its business-friendly environment, characterized by minimal taxation. However, in line with global tax reforms and to enhance non-oil revenue, the UAE has introduced new corporate tax regulations. Effective from January 1, 2024, a 15% minimum top-up tax, known as the Domestic Minimum Top-up Tax (DMTT), is imposed on large multinational enterprises (MNEs) operating within the country.

Who Is Affected?

The DMTT applies to MNEs with consolidated global revenues of at least €750 million in two out of the four preceding financial years. This move aligns with the Organisation for Economic Co-operation and Development's (OECD) global minimum corporate tax agreement, aiming to ensure that large corporations pay a minimum effective tax rate of 15% on profits in each country where they operate.

Implications for Businesses

While the standard corporate tax rate in the UAE remains at 9%, excluding free zones, the introduction of the DMTT signifies the UAE's commitment to global tax standards and reducing tax avoidance. Businesses meeting the revenue threshold must assess their tax structures to ensure compliance with the new regulations.

Future Considerations

The UAE's Ministry of Finance is also exploring additional corporate tax incentives, including refundable tax credits for research and development (R&D) and high-value employment activities, potentially applicable from 2025 onwards, pending legislative approval.

Conclusion

The implementation of the DMTT marks a significant shift in the UAE's taxation landscape. Large MNEs must stay informed and adapt to these changes to maintain compliance and optimize their tax strategies.