UAE to Impose 15% Minimum Top-Up Tax on Multinationals
In a bold move to boost non-oil revenue, the UAE announced on Monday that it will implement a minimum top-up tax (DMTT) of 15 percent on large multinational companies operating in the country starting in January.
Global Minimum Corporate Tax Agreement
The DMTT is part of the OECD’s global minimum corporate tax agreement, with 136 signatories, including the UAE. The aim is to ensure that big companies pay a minimum of 15 percent and to make tax avoidance more challenging.
New Amendments to Corporate Tax Law
In amendments to the corporate tax law, the UAE’s finance ministry stated that the DMTT will apply to companies with consolidated global revenue of 750 million euros ($793.50 million) or more in at least two out of the four financial years preceding the implementation of the tax.
Impact on Multinationals in the UAE
The UAE, particularly Dubai, is a hotspot for multinational companies in the Middle East. These tax amendments come after the UAE introduced a 9 percent business tax last year, with exemptions for the numerous free zones that drive its economy.
OECD’s Two-Pillar Solution
The DMTT is part of the Organization for Economic Co-operation and Development’s Two-Pillar Solution, which mandates that large multinational enterprises pay a minimum effective tax rate of 15 percent on profits in each country where they operate.
Corporate Tax Incentives on the Horizon
The UAE’s finance ministry is also exploring the introduction of various corporate tax incentives. This includes a potential refundable tax credit of 30 percent to 50 percent for research and development starting in 2026.
Another proposed incentive is a refundable tax credit for high-value employment activities, which could be implemented as early as January 1, 2025. However, these incentives are still pending legislative approval.