UAE introduces new tax ‘DMTT’ and incentives for multinationals
The United Arab Emirates (UAE) has announced the implementation of the Domestic Minimum Top-up Tax (DMTT), which will take effect from financial years beginning on or after January 1, 2025. The move targets multinational enterprises (MNEs) with consolidated global revenues of €750 million or more in at least two of the four financial years preceding the introduction of the tax.
The DMTT aligns with the UAE’s commitment to the Organisation for Economic Co-operation and Development’s (OECD) Two-Pillar Solution, aimed at creating a transparent and equitable global tax framework. Under the standard UAE corporate tax rate of 9%, the DMTT will require qualifying multinationals to pay an additional tax to ensure a minimum effective tax rate of 15% on profits earned in the UAE. This measure is consistent with the OECD’s Global Anti-Base Erosion (GloBE) Model Rules, designed to address tax avoidance by multinational firms leveraging low-tax jurisdictions.
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In addition to the DMTT, the UAE is proposing new tax incentives to encourage research and development (R&D) and high-value employment activities. An expenditure-based R&D tax incentive is under consideration, potentially offering businesses a 30-50% tax credit. The incentive will be refundable depending on the revenue and workforce size of eligible companies operating in the UAE.
The Ministry of Finance also plans to introduce a refundable tax credit for high-value employment activities. The incentive will focus on C-suite executives and senior personnel whose core business functions add significant value to the UAE economy. Both the R&D and employment incentives are proposed to be effective from January 1, 2025, but are subject to legislative approvals.
“The Ministry of Finance will provide further guidance for taxpayers regarding these incentives in due course,” said an official statement, emphasizing that the final implementation details will depend on legislative processes.
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