UAE to introduce 15% corporate tax starting from January

UAE to Implement 15% Minimum Tax on Multinational Corporations from January 2025

A minimum top-up tax (DMTT) of 15% is scheduled to be implemented by the United Arab Emirates (UAE) for major multinational corporations (MNEs) doing business there.

In accordance with international norms, it will be put into effect on or after January 1, 2025, with the goal of creating a just and open system.

According to the Ministry of Finance, the DMTT will be levied on MNEs with revenues of 750 million euros or more in two of the preceding financial years.

The UAE has exempted various free zones in the country, a year after implementing a 9 percent corporate tax.

This strategic move reflects the UAE’s commitment 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 aligned with global standards.

The OECD’s two-pillar reform initiative established a global minimum corporate tax to ensure that large MNEs pay at least 15 percent tax on profits in any country in which they operate.

According to the OECD, the initiative aims to address tax issues arising from the digitalization and globalization of the economy, as well as curb tax competitiveness.

In September, Bahrain announced that it would introduce DMTT on large MNEs from January 1, 2025.

Kuwait is set to impose a 15 percent corporate tax rate on large MNEs from the beginning of 2025.

R&D tax incentive
The ministry said it was exploring new corporate tax incentives to enhance economic competitiveness and streamline business operations.

A new R&D tax incentive is being proposed to encourage R&D activities and foster innovation.

The ministry added that the cost-based incentive will provide a refundable tax credit of 30 percent to 50 percent, depending on the company’s operations and revenue in the UAE.

It is expected to come into effect for tax periods beginning on or after January 1, 2026.

Tax credit for high-value employment activities
A refundable tax credit is being considered to encourage businesses to engage in high-value employment activities, promoting economic benefits, innovation and global competitiveness.

From January 1, 2025, a percentage of eligible salary costs will be provided to high-value employees, including C-suite executives and senior staff, who make a significant contribution to the UAE economy.