UAE Introduces Minimum Top-up Tax for Multinational Corporations
The UAE has announced a significant update to its Corporate Tax rules by introducing a Domestic Minimum Top-up Tax, effective for financial years starting on or after 1 January 2025, Gulf News reported.
This tax will apply to multinational enterprises operating in the UAE with consolidated global revenues of at least 750 million euros in at least two of the four financial years immediately preceding the year in which the DMTT is applicable.
Currently, the UAE’s standard corporate tax rate is 9%, but the DMTT will require multinationals to pay an additional tax on UAE-generated revenues, ensuring compliance with the Organisation for Economic Co-operation and Development’s (OECD) Two-Pillar Solution. This solution aims to establish a fair and transparent global tax framework. The UAE’s DMTT implementation will align with the OECD’s GloBE Model Rules, which mandate a minimum effective tax rate of 15% for MNEs’ profits in each country of operation.
The OECD’s Pillar Two rules were developed to prevent global businesses from avoiding higher home-country taxes by relocating headquarters to low-tax jurisdictions. By setting a minimum tax rate of 15%, these rules ensure equitable taxation across borders.
New Incentives to Encourage R&D and High-Value Employment
To promote research and development (R&D), the UAE Ministry of Finance plans to introduce a specific tax incentive for R&D investments. Following public consultations in April 2024, this incentive is expected to be effective for tax periods starting on or after 1 January 2026.
The proposed R&D incentive will be expenditure-based, offering a 30–50% tax credit. This tax credit may also be refundable depending on business revenue and the number of UAE-based employees.
Additionally, a refundable tax credit is considered to encourage high-value employment activities. This initiative aims to stimulate innovation, deliver substantial economic benefits, and bolster the UAE’s global competitiveness. Effective from 1 January 2025, the tax credit would be granted as a percentage of eligible salary costs for employees engaged in high-value roles.
