A recent amendment to the UAE corporate tax regime for large multinational enterprises, guided by the global standards for tax, introduces a 15% DMTT (Domestic Minimum Top-up Tax). This new tax shows the UAE’s determination to stay aligned with international tax benchmarks.
The minimum effective tax rate under this DMTT (Domestic Minimum Top-up Tax) is 15%. This applies to companies falling under multinational enterprises (MNEs), having a consolidated revenue exceeding €750 million (or $793 million), within at least two out of the last four consecutive financial years, prior to the tax year. This regulation matches the OECD Pillar Two framework to ensure an international level playing field to also mitigate tax-avoidance issues.
Free zones businesses enjoy tax exemption. The approach of increasing the tax rate for large multinational enterprises (MNEs) while maintaining the benefits for free zone businesses is a reflection of the UAE's subtle strategy in promoting economic growth and remaining competitive on the global stage.
Read more: Guide on Corporate Tax in UAE on Oil and Gas Industries
Tax policy offers an opportunity and a challenge to the multinational enterprises (MNEs) working within the UAE:
| Key Factors for MNEs | Details |
| Higher Tax Obligations | This new 15% tax rate means that businesses will have to revise their tax strategy and ensure compliance with the new regulations. |
| Utilization of Incentives | MNEs can take advantage of R&D and high-value employment tax credits to reduce their tax liabilities. This implies that, through these investments, firms are not only reducing their tax liability but also contributing to the economic growth of the UAE in terms of investments in innovation and talent development. |
| Strategic Planning | With changes in the tax landscape, proper tax frameworks of the entity are required to be developed with the aid of professional tax consultants. |
| Competitive Advantage | The new tax regime provides the element of competitive advantage for compliant businesses. Compliance with the international tax standards will provide prestige and credibility to the businesses operating in the UAE internationally. |
To effectively ensure compliance with the UAE corporate tax law, businesses are advised to seek the expert services of premier Tax Consultants in UAE. Thus, contact us today and we shall be glad to assist you.
FAQs
What is 15% DMTT?
DMTT is the new 15% minimum tax charged to multinational companies with revenues of more than €750 million during at least two of the last four years in the UAE. According to the OECD Pillar Two, this is being levied toward equal worldwide taxation for reducing tax avoidance.
Who does DMTT cover?
The DMTT covers multinational enterprises whose revenue exceeds the threshold amount. Free zone businesses in the UAE are exempted, keeping the UAE as a global destination for global business.
What are the benefits from this new regime of corporate taxation? Incentives available in the UAE include:
How does DMTT help in economic diversification? The revenues generated by DMTT would be channeled into other sectors like technology, healthcare, and education as part of UAE's vision to have a diversified, sustainable economy.
How does DMTT ensure compliance with International Regulation?
It follows OECD's international tax agenda, that is, positioning UAE in a fair and transparent manner as a hub of competitive but responsible global businesses.
When will these new tax policies go into effect?
The DMTT will be effective starting on January 1, 2025, while the R&D tax incentives will come into effect starting January 1, 2026.
Shayan Khan is an experienced Corporate Tax Consultant with over 4 years of expertise. He’s skilled in negotiating and investigating taxes with government bodies like the Federal Tax Authority. Shayan is really good at reviewing and drafting tax papers and offers strategic advice on complex tax matters. Clients trust his guidance in navigating tax procedures and minimizing liabilities.