UAE announces massive tax on multinational companies

The UAE Ministry of Finance has announced significant updates to its corporate tax system, including the introduction of a Domestic Minimum Top-up Tax (DMTT) for multinational enterprises (MNEs).

The new tax will come into effect for financial years starting on or after January 1, 2025, and will apply to MNEs operating in the UAE with consolidated global revenues of 750 million euros or more in at least two out of the four financial years preceding the year in which the DMTT applies.

The UAE’s standard corporate tax rate remains at 9%, but the DMTT will require multinationals to pay an additional tax on their UAE-generated revenues.

The new regulations will adhere closely to the OECD’s Global Anti-Base Erosion (GloBE) Model Rules, which mandate that MNEs must pay a minimum effective tax rate of 15% on profits in every country where they operate.

In addition to the DMTT, the Ministry of Finance is also proposing incentives to encourage research and development (R&D) activities. Following public consultations in April 2024, the ministry outlined plans to introduce an expenditure-based R&D tax incentive, offering potential tax credits of 30-50%.

The incentive will be refundable depending on the business’s revenue and employee count in the UAE and is expected to take effect for tax periods starting on or after January 1, 2026.

Furthermore, the government is considering a refundable tax credit for businesses that engage in high-value employment activities, particularly targeting C-suite executives and senior personnel involved in core business functions that add substantial value to the UAE economy. 

Additional details and guidance for taxpayers will be provided as the legislation progresses.