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The United Arab Emirates (UAE) introduced a 15% minimum top-up tax (DMTT) on large multinational companies operating within the country starting January 1, 2025, as part of its efforts to boost non-oil revenues and align with the Organization for Economic Co-operation and Development (OECD) global tax reforms.
This new tax initiative is a component of the OECD’s Two-Pillar Solution, which seeks to ensure that multinational enterprises (MNEs) pay a minimum corporate tax rate of 15% on profits earned in each jurisdiction where they operate. The DMTT applies to companies with consolidated global revenues of 750 million euros (approximately $793.5 million) or more, for at least two of the four financial years preceding the tax’s implementation.
UAE’s Corporate Tax Break: A Powerful Magnet for Top Talent and Businesses
A Shift in UAE’s Tax Landscape
The introduction of the DMTT follows a significant shift in the UAE’s corporate tax structure, which began rolling out a 9% corporate tax in 2024, with exemptions for many of the free zones that have traditionally supported the UAE’s economy. These changes are seen as part of the UAE’s broader strategy to diversify its revenue sources and reduce its reliance on oil.
The UAE’s move to implement the DMTT is part of a global push to close loopholes in international tax systems and combat tax avoidance by large corporations, especially those with substantial revenues in multiple jurisdictions.
Potential Corporate Tax Incentives in the Works
In addition to the minimum tax, the UAE’s finance ministry has indicated that it is considering several tax incentives to attract investment and innovation. Among the most notable proposals is an R&D tax incentive slated to take effect in 2026, which could offer a refundable tax credit ranging from 30% to 50%, depending on the size of the company’s operations in the UAE and its revenue.
Furthermore, the UAE is exploring tax credits for high-value employment activities, which could be granted to companies based on eligible income costs for employees. These credits may be implemented as early as January 1, 2025, subject to legislative approval.
The DMTT is part of a broader effort to ensure that multinational companies contribute fairly to the tax systems of the countries in which they operate. With the UAE’s status as a global business hub, particularly in the Middle East and North Africa (MENA) region, these changes could have significant implications for companies currently operating in free zones or considering the UAE as a base for regional operations.
The new corporate tax incentives are expected to make the UAE a more attractive destination for investment, particularly in high-tech industries and sectors focused on research and development. As tax reforms continue to evolve globally, the UAE’s move to align with the OECD’s tax guidelines could serve as a model for other jurisdictions aiming to balance competitive tax rates with global tax compliance.
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