The UAE has announced a new tax for multinational companies operating within the country. These businesses will be required to pay a minimum tax rate of 15% on their profits, ensuring alignment with global tax standards.
The Ministry of Finance confirmed on Monday that the Domestic Minimum Top-up Tax (DMTT) will come into effect for financial years starting on or after January 1, 2025. This step aims to create a fair and transparent tax system.
Key Details About the DMTT
The DMTT will apply to multinational companies in the UAE that have global consolidated revenues of €750 million (around Dh300 million) or more in at least two of the four financial years prior to the year the DMTT becomes applicable.
Further information about this legislation will be provided by the Ministry of Finance in the coming months.
UAE’s Commitment to Global Standards
This move underscores the UAE’s efforts to maintain a business-friendly environment, while also enhancing its economic competitiveness. It aligns with the UAE’s commitment to the OECD’s Two-Pillar Solution, ensuring that global tax fairness is maintained.
New Corporate Tax Incentives
To encourage innovation and support sustainable growth, the Ministry of Finance is planning to introduce two new corporate tax incentives under Federal Decree-Law No. 47 of 2022.
- R&D Tax Incentive
The proposed R&D tax incentive will encourage businesses to invest in research and development (R&D) within the UAE. Based on public feedback from April 2024 consultations, this incentive is expected to take effect for tax periods starting January 1, 2026.- Businesses could receive a 30-50% tax credit on R&D expenses.
- The incentive will align with OECD’s Frascati Manual guidelines, and qualifying activities must be conducted within the UAE.
- Tax Credit for High-Value Employment
Another proposed incentive is a tax credit for high-value employment activities. This aims to attract and retain talent, boosting economic growth and enhancing the UAE’s global competitiveness.- The incentive will be available from January 2, 2025.
- It offers a percentage refund on eligible salary costs for senior personnel, including C-suite executives, engaged in core business activities that add significant value to the UAE economy.
Both incentives are subject to legislative approval before final implementation.
