The UAE has announced the implementation of a Domestic Minimum Top-up Tax (DMTT) for multinational enterprises (MNEs) with significant global revenues. Starting from financial years commencing on or after January 1, 2025, large MNEs operating in the UAE will be required to pay a minimum effective tax rate of 15% on their profits.
This tax applies to MNEs with consolidated global revenues of €750 million (approximately AED 3 billion) or more in at least two of the four financial years preceding its enforcement. The initiative aims to create a fair and transparent tax system that aligns with international standards, particularly the Organization for Economic Co-operation and Development’s (OECD) Two-Pillar Solution.
The Ministry of Finance emphasized that this move underscores the UAE’s commitment to enhancing its economic competitiveness, fostering a business-friendly environment, and supporting its national strategic objectives. Detailed guidelines on the DMTT are expected to be issued in due course.
Incentives to Drive Growth and Innovation
The UAE Ministry of Finance is also exploring new corporate tax incentives under Federal Decree-Law No. 47 of 2022 to encourage innovation and attract investments.
R&D Tax Incentive
An R&D tax incentive is under consideration to promote research and innovation within the UAE. Based on public consultations held in April 2024, the incentive is proposed to take effect for tax periods starting on or after January 1, 2026. Key features include:
- A 30-50% tax credit on qualifying R&D expenditure.
- Refundability based on the business’s revenue and workforce size.
- Alignment with the OECD’s Frascati Manual guidelines for qualifying R&D activities conducted within the UAE.
Tax Credit for High-Value Employment
Another proposed measure is a refundable tax credit for high-value employment activities, targeting roles that contribute significantly to the UAE economy. Effective from January 2, 2025, the incentive would apply to eligible salary costs for employees in senior roles, including C-suite executives and personnel performing core business functions.
These initiatives, pending legislative approvals, reflect the UAE’s commitment to fostering sustainable growth, innovation, and global competitiveness while ensuring alignment with international tax frameworks.
