UAE Issues Domestic Minimum Top-Up Tax for Multinationals
UAE Ministry of Finance 2024 Cabinet Decision No. 142, which includes a decision on the introduction of a top-up tax for multinational companies, provides further details regarding the UAE Domestic Minimum Top-up Tax (UAE DMTT).
This was announced following an announcement made by the ministry on December 9, 2024, Emirates News Agency (WAM) reported.
The UAE DMTT closely complies with the Organisation for Economic Co-operation and Development’s (OECD) GloBE Model Rules. Companies that are part of multinational enterprises (MNEs) that operate in the United Arab Emirates and have consolidated financial statements of the ultimate parent company that show an annual global revenue of €750 million or more in at least two of the four fiscal years prior to the fiscal year to which the UAE DMTT applies are subject to the UAE DMTT.
The UAE DMTT offers relief through a material income exemption, which lowers the net pillar two income subject to the UAE DMTT by a sum determined by the carrying value of tangible assets and wages subject to the UAE DMTT in order to identify excess profits for the UAE DMTT calculation.
In cases where a company meets the applicable minimum exemption criteria, the UAE DMTT allows for an exemption in addition to the GloBE model regulations. In such cases, the company’s UAE DMTT will be deemed to be zero if the specified requirements are met.
To increase the UAE’s competitiveness as a top investment hub, the statement said that the UAE DMTT is set up to exclude investment entities as such terms are specified by these regulations.
The UAE DMTT will not be imposed during the first stage of an MNE group’s international operations as a temporary measure and to foster an environment that encourages economic growth, so long as no parent company holding ownership interests in the UAE-based entities is subject to a qualifying income inclusion rule in another jurisdiction.