UAE to impose 15% domestic minimum top-up tax on multinationals starting in 2025

The United Arab Emirates (UAE) is set to introduce a new tax measure for multinational corporations, which will require them to pay a minimum effective tax rate of 15% on their profits. This Domestic Minimum Top-up Tax (DMTT) will come into effect for financial years beginning on or after January 1, 2025.

According to the Ministry of Finance, the DMTT aims to create a fair and transparent tax framework that aligns with global tax standards. The tax will apply to multinational enterprises (MNEs) operating within the UAE, provided they meet certain conditions. Specifically, it will target MNEs with consolidated global revenues of €750 million (approximately Dh3 billion) or more in at least two of the four preceding financial years.

The Ministry of Finance further stated that additional details regarding the DMTT will be released in the future. This tax policy is part of the UAE’s broader efforts to strengthen its economy by enhancing its competitiveness and ensuring that its business environment remains attractive and transparent.

In line with global tax practices, this new tax initiative is in response to the Organisation for Economic Co-operation and Development’s (OECD) Two-Pillar Solution, which aims to prevent tax avoidance by multinational corporations and ensure that profits are taxed where economic activity occurs.

Alongside this tax update, the Ministry is also exploring a range of corporate tax incentives to foster sustainable growth and innovation. One of the key proposals under consideration is a research and development (R&D) tax incentive. The government plans to introduce an expenditure-based tax credit of 30-50% for companies engaging in R&D activities within the UAE. This initiative is designed to encourage more investment in innovation and technological advancement in the country. The R&D incentive is expected to take effect for tax periods starting on or after January 1, 2026.

Additionally, a refundable tax credit is being proposed for high-value employment activities. This would provide tax relief based on a percentage of the salary costs for employees engaged in activities that bring substantial economic value to the UAE. This incentive would primarily target senior personnel, including C-suite executives, involved in key business operations that contribute significantly to the UAE economy. The proposed tax credit for high-value employment is expected to come into effect on January 2, 2025.

The implementation of these proposed tax incentives, like the DMTT, is still subject to approval through the legislative process. Together, these measures reflect the UAE’s ongoing commitment to enhance its business climate, drive economic growth, and ensure that the country remains competitive on a global scale.