FTA has published two Top-up Tax Guides setting out the scope, registration requirements and treatment of Excluded Entities and Investment Entities under the Qualified Domestic Minimum Top-up Tax (QDMTT) Legislation.
The UAE Federal Tax Authority (FTA) has issued two guides dated 26 August 2026 providing administrative and technical guidance on the Qualified Domestic Minimum Top-up Tax (QDMTT) Legislation.
The guidance covers how multinational enterprise (MNE) groups come within the QDMTT regime, which UAE entities must register, the applicable registration deadlines and the rules for Excluded Entities and Investment Entities.
The QDMTT Legislation applies to Fiscal Years beginning on or after 1 January 2025. The guidance is set out in the Top-up Tax Guide | TTGREG1 – Scope and Registration and Top-up Tax Guide | TTGEIE1 – Excluded Entities and Investment Entities.
Scope of the QDMTT legislation
Under TTGREG1, an MNE Group falls within the QDMTT Legislation where it satisfies the Consolidated Revenue Threshold Condition.
The group must have annual consolidated revenue of EUR 750 million or more in at least two of the four Fiscal Years immediately preceding the tested Fiscal Year.
An in-scope MNE Group must also include at least one entity or Permanent Establishment (PE) located in the UAE and at least one entity or PE located in a foreign jurisdiction. This can include a standalone UAE entity with a foreign PE or a standalone foreign entity with a UAE PE.
The legislation applies to Entities that are members of an in-scope MNE Group. An Entity includes any juridical person with separate legal personality and an arrangement that prepares separate financial accounts, including a partnership or trust.
Natural persons and central, state or local government administrations carrying out government functions are excluded from the definition of an Entity.
UAE entities within scope can include Constituent Entities, Minority-Owned Constituent Entities, Joint Ventures (JVs) and JV Subsidiaries.
Registration obligations
UAE Constituent Entities that are subject to Top-up Tax must register with the FTA for QDMTT purposes.
The guidance states that an entity must still register even where its Top-up Tax is expected to be zero under certain safe harbour provisions or exclusions. This includes the Transitional CbCR Safe Harbour, Simplified Calculations Safe Harbour and De-minimis exclusion. Such entities remain subject to the charging provisions.
Registration can be completed individually under the Entity-by-Entity approach. Alternatively, entities can appoint a Domestic Designated Filing Entity (DDFE) to register and file on behalf of the UAE domestic group.
For a Fiscal Year ending before 30 April 2026, the registration application must be submitted to the FTA on or before 30 November 2026.
For other cases, the application must be submitted within seven months from the end of the first Fiscal Year in which the Entity falls within the scope of the QDMTT Legislation.
Failure to submit the registration application within the prescribed period results in an Administrative Penalty of AED 10,000 for each Entity.
Where a DDFE has been appointed but fails to submit an application on time, the AED 10,000 penalty applies to each individual Entity for which the DDFE failed to complete the registration.
Four Pillar Two information return options
The UAE has also established four filing options for entities required to submit a Pillar Two Information Return (GloBE Information Return) under Ministerial Decision No. 133 of 2026.
Under Option 1, each Constituent Entity in the UAE, excluding Investment Entities, together with each Joint Venture and JV Subsidiary, files its own return.
Under Option 2, a Designated Local Entity files one consolidated return on behalf of all UAE-located members.
Option 3 allows the UPE located in a foreign jurisdiction to file the return where that jurisdiction has a Qualifying Competent Authority Agreement in effect with the UAE for the relevant Fiscal Year.
Under Option 4, a Designated Filing Entity in a foreign jurisdiction can file where an active exchange agreement with the UAE is in effect.
Where Options 2, 3 or 4 are successfully implemented, the relevant UAE entities are discharged from their individual filing obligations.
Excluded Entities outside the charging provisions
TTGEIE1 explains which Excluded Entities and Investment Entities fall outside the Top-up Tax charging provisions.
The guide identifies five primary categories of Excluded Entities: International Organisations, Non-profit Organisations, Pension Funds, Investment Funds that are Ultimate Parent Entities (UPEs) and Real Estate Investment Vehicles that are UPEs.
International Organisations generally comprise intergovernmental or supranational entities made up primarily of governments. Their governing arrangements must prevent their income from benefiting private persons.
A Non-profit Organisation must meet conditions relating to its purpose, ownership, tax-exempt income and treatment of assets. It must be established and operated exclusively for purposes including religious, charitable, scientific, artistic, cultural, athletic, educational or professional/social welfare activities.
A Pension Fund must operate exclusively or almost exclusively to administer or provide regulated retirement and ancillary benefits. The classification also includes Pension Services Entities that invest funds or undertake ancillary activities exclusively for a Pension Fund.
The remaining primary categories cover regulated Investment Funds that are UPEs and Real Estate Investment Vehicles that are UPEs, subject to the relevant conditions.
Secondary excluded entities
The guide also provides rules for Secondary Excluded Entities established by primary Excluded Entities.
Under the first test, one or more primary Excluded Entities, excluding Pension Services Entities, must hold at least 95% of the entity’s value. The entity must operate exclusively or almost exclusively to hold assets or invest funds for the primary Excluded Entity or undertake activities ancillary to those of the Excluded Entity.
The second test requires at least 85% of the entity’s value to be owned by one or more primary Excluded Entities, excluding Pension Services Entities. Substantially all of its income must consist of Excluded Dividends or Excluded Equity Gains or Losses.
For these ownership tests, value is measured by reference to the total value of Ownership Interests issued. Unrealised revaluation or impairment movements are disregarded.
Permanent Establishments and non-profit subsidiaries
The guidance sets out separate rules for Permanent Establishments (PEs) of Excluded Entities.
Where the Main Entity is a primary Excluded Entity, its PEs are automatically treated as Excluded Entities. For a secondary Excluded Entity, the activities of its PEs are considered together with those of the Main Entity when determining whether the applicable activities and income tests are met.
Wholly owned subsidiaries of Non-profit Organisations can also qualify as Excluded Entities where specific conditions are satisfied.
The Ownership Condition requires 100% of the entity’s value to be owned directly or indirectly by one or more Non-profit Organisations.
The Group Revenue Condition requires aggregate MNE Group revenue to be less than EUR 750 million, after ignoring the revenue of the parent Non-profit Organisations and relevant secondary Excluded Entities.
The Revenue Percentage Condition requires the combined revenue of the tested entity and other non-excluded and non-secondary excluded entities to be less than 25% of the MNE Group’s consolidated revenue.
Five-Year election
A Filing Constituent Entity, or a DDFE where one has been appointed, may make a Five-Year Election to treat a secondary Excluded Entity or a wholly owned subsidiary of a Non-profit Organisation as a taxable Constituent Entity.
The election is made on an Entity-by-Entity basis and is irrevocable for the election year and the following four Fiscal Years.
Investment entities
Investment Entities located in the UAE are also outside the charging provisions of the Top-up Tax.
Primary Investment Entities include Investment Funds, Real Estate Investment Vehicles and Insurance Investment Entities that are not UPEs of an MNE Group.
An Insurance Investment Entity must be established to back liabilities under insurance or annuity contracts and be wholly owned by regulated insurance companies in the same MNE Group.
The guidance also recognises Secondary Investment Entities. The first category requires at least 95% ownership by one primary Investment Entity, or a chain of primary Investment Entities, together with the required asset-holding or investment activities.
The second category requires at least 85% direct ownership by one primary Investment Entity, with substantially all income consisting of Excluded Dividends or Excluded Equity Gains/Losses.
Administrative consequences
Excluded Entities and Investment Entities do not have a Top-up Tax liability under the applicable charging provisions. For Excluded Entities, financial attributes such as profits, losses, taxes, tangible assets and payroll are excluded from Top-up Tax computations.
Investment Entity attributes are also excluded unless the relevant owners make specific elections, including Tax Transparency or Taxable Distribution Method elections.
Their excluded status does not, however, remove their revenue from the MNE Group’s scope calculation. Revenue from these entities must still be considered when determining whether the group’s consolidated revenue reaches the EUR 750 million threshold.
The guidance also provides administrative relief for Excluded Entities and Investment Entities, which generally have no UAE registration, return filing or Pillar Two Information Return filing obligations. Information concerning their existence and corporate structure must nevertheless be disclosed in the group’s Pillar Two Information Return filed by another Constituent Entity.
FTA clarifies QDMTT compliance framework
The two guides give MNE Groups and their UAE entities a detailed framework for applying the QDMTT Legislation. TTGREG1 establishes the rules for determining scope and registration, while TTGEIE1 addresses the classification and treatment of Excluded Entities and Investment Entities.
The guidance also makes clear that entities benefiting from exclusions or safe harbours must be assessed separately for their QDMTT obligations, while the group’s consolidated revenue remains relevant to the initial scope test. For entities that are subject to the regime, the registration deadlines and AED 10,000 Administrative Penalty establish the key compliance requirements under the UAE framework.
