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UAE announces 15% domestic minimum top-up tax for multinationals in 2025

'Domestic minimum top-up tax' will apply to MNEs with global revenues of €750 million or more in at least two of the four financial years preceding its implementation

Published: Mon 9 Dec 2024, 10:52 PM

Updated: Sun 15 Dec 2024, 4:50 PM

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The UAE is set to implement a new tax on multinational companies operating in the Emirates. Large multinational enterprises (MNEs) must pay a minimum effective tax rate of 15 per cent on their profits.

The Ministry of Finance on Monday announced that Domestic Minimum Top-up Tax (DMTT) will be effective for financial years starting on or after January 1, 2025 to establish a fair and transparent tax system aligned with global standards.

The Ministry added that the DMTT will apply to multinational enterprises operating in the UAE with consolidated global revenues of €750 million (approx Dh3 billion) or more in at least two out of the four financial years immediately preceding the financial year in which the DMTT applies.

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Further details on this legislation will be issued by the Ministry of Finance in due course.

The UAE continues to enhance its business-friendly environment, reflecting its commitment to national strategic objectives such as strengthening economic competitiveness and improving ease of doing business. This major update is in line with the country’s commitment to implement the Organisation for Economic Co-operation and Development’s (OECD) Two-Pillar Solution.

R&D tax incentive in the pipeline

To promote sustainable growth, innovation, and investment, the Ministry of Finance is considering the introduction of the following Corporate Tax Incentives.

A research and development (R&D) tax incentive is being considered to encourage research and development (R&D) activities and foster innovation and economic growth within the UAE. Based on feedback received during public consultations conducted in April 2024, the proposed incentive is expected to take effect for tax periods starting on or after January 1, 2026.

The R&D tax incentive will be expenditure-based, offering a potential 30-50 per cent tax credit and will be refundable depending on the revenue and number of employees of the business in the UAE.

The scope of Qualifying R&D activities will be aligned with the OECD’s Frascati Manual guidelines and must be conducted within the UAE.

Tax credit for high-value employment activities

Another incentive being considered is a refundable tax credit for high-value employment activities. This aims to encourage businesses to engage in activities that deliver significant economic benefits, stimulate innovation, and enhance the UAE’s global competitiveness.

This incentive is proposed to take effect on January 2, 2025 and will be granted as a percentage of eligible salary costs for employees engaged in high-value employment activities. This includes C-suite executives and other senior personnel performing core business functions that add substantial value to the UAE economy.

The final form and implementation of the proposed incentives are subject to legislative approvals.

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