All global companies operating in the UAE will be subject to the 15% Domestic Minimum Top-up Tax (DMTT) starting in 2025, according to tax experts.
The UAE’s Ministry of Finance has confirmed that the DMTT will apply to financial years beginning on or after January 1, 2025. This aligns with the OECD’s framework under its two-pillar solution for global tax reform.
Key Details of the DMTT
The DMTT targets multinational enterprises (MNEs) with global revenues exceeding €750 million in at least two of the four years before the financial year in which the DMTT applies.
Tax expert Thomas Vanhee, founding partner of Aurifer Middle East Tax Consultancy, emphasized, “This tax applies to all internationally operating companies.” He noted that 145 countries have agreed to this framework, with some implementing it as early as 2024.
Anurag Chaturvedi, CEO of Andersen UAE, explained that UAE-based MNEs and foreign MNEs with subsidiaries in the UAE exceeding the revenue threshold will be affected by the DMTT, as outlined under Pillar 2 of the OECD’s solution.
Vishal Sharma, managing director and UAE tax practice leader at Alvarez and Marsal, highlighted that the UAE is aligning with GCC neighbors like Bahrain, Qatar, and Kuwait, which have taken steps to implement similar tax rules.
Exemptions Under the DMTT
Chaturvedi clarified that groups operating entirely within the UAE are exempt from this tax. Final details are awaited to confirm whether other exemptions or exceptions will apply.
Vanhee added that domestic companies and specific entities, such as government bodies, investment funds, real estate investment trusts, and shipping income, are excluded from the scope of the DMTT.
Impact on UAE Businesses
Bal Krishen, chairman of Century Group, explained that the UAE’s transition from a tax haven to a low-tax jurisdiction began with the introduction of a 9% corporate tax in 2023. He noted that the new 15% tax might initially impact profitability and investor sentiment.
However, free zone corporations will retain their tax exemptions, and even with the DMTT, the UAE remains an attractive business destination compared to countries like the UK (25% corporate tax) and Saudi Arabia (20%).
Krishen also highlighted potential incentives to support businesses, including tax credits for research and development (30-50% refundable) and high-value employment activities.
This step reinforces the UAE’s efforts to boost entrepreneurship while maintaining its reputation as a favorable business hub.
