The United Arab Emirates will implement a 15% Domestic Minimum Top-Up Tax (DMTT) starting in 2025, targeting multinational enterprises (MNEs) with global revenues of €750 million (approximately AED 3.15 billion) or more. The move aligns with the Organisation for Economic Co-operation and Development’s (OECD) two-pillar global tax framework, tax experts confirmed.
Announced by the UAE’s Ministry of Finance, the DMTT will apply to financial years beginning on or after January 1, 2025. This tax is part of a global initiative embraced by 145 countries to ensure a baseline corporate tax rate of 15% for qualifying multinational companies.
Impact on Multinational Enterprises
Thomas Vanhee, founding partner at Aurifer Middle East Tax Consultancy, highlighted that this measure applies universally to companies operating across borders. “In almost all countries around the world, we will have a bottom limit of 15%,” Vanhee noted.
Anurag Chaturvedi, CEO at Andersen UAE, stated that UAE-based multinational enterprises and foreign MNEs with subsidiaries in the UAE exceeding the revenue threshold would be subject to the new tax. Vishal Sharma, managing director and UAE tax practice leader at Alvarez & Marsal, added that the UAE is aligning its approach with other GCC nations such as Bahrain, Qatar, and Kuwait, which are also advancing their implementation of the OECD rules.
Exemptions and Domestic Implications
Certain entities, such as purely UAE-based groups, government organizations, investment funds, real estate investment trusts, and income from shipping activities, are exempt from the DMTT, according to experts. “Further details on the final legislation are awaited,” Chaturvedi said.
Vanhee emphasized that domestic companies not meeting the multinational enterprise criteria would remain outside the scope of the tax.
Economic Transition and Business Impact
Bal Krishen, chairman of Century Group, observed that the UAE has evolved from a tax haven to a low-tax jurisdiction with the introduction of a 9% corporate tax rate in 2023. He noted that while the higher tax regime might dampen short-term profitability and investor sentiment, the UAE’s tax rate remains competitive compared to countries like the UK (25%) and Saudi Arabia (20%).
Krishen added that the government is likely to introduce tax incentives to offset potential business concerns. Proposed measures include refundable tax credits of 30% to 50% for research and development expenditures and incentives for high-value employment activities.
Despite these changes, experts believe the UAE will maintain its status as an attractive business hub, thanks to its free zones and other economic advantages.
