The UAE Ministry of Finance has announced that it has updated certain provisions of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses on 9 December 2024.
These amendments include introduction of a Domestic Minimum Top-up Tax (DMTT), which means the UAE will introduce a 15% minimum tax rate for in-scope multinational groups starting January 2025.
The UAE also announced tax incentives to support growth and innovation. To foster growth and innovation, proposed incentives include tax credits for high-value employment activities starting in 2025 and for research and development initiatives beginning in 2026.
The DMTT is a key component of the OECD’s global minimum corporate tax agreement, endorsed by 136 countries, including the UAE. This initiative aims to ensure that large corporations pay a minimum tax rate of 15%, while also curbing tax avoidance on a global scale.
Introduction of a domestic minimum top-up tax (DMTT)
Following the issuance of Federal Decree Law No. 60 of 2023, a Domestic Minimum Top-up Tax (DMTT) will be effective in the UAE for financial years starting on or after 1 January 2025. This strategic step reflects the UAE’s commitment to implementing the Organisation for Economic Co-operation and Development’s (OECD) Two-Pillar Solution, aimed at establishing a fair and transparent tax system aligned with global standards.
The Pillar Two rules require large multinational enterprises (MNEs) to pay a minimum effective tax rate of 15% on profits in every country where they operate.
The DMTT will apply to multinational enterprises operating in the UAE with consolidated global revenues of EUR 750 million or more in at least two out of the four financial years immediately preceding the financial year in which the DMTT applies. The UAE’s implementation of the DMTT will closely align with the OECD GloBE rules.
Tax incentives to support growth and innovation
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.
To promote sustainable growth, innovation, and investment, the Ministry of Finance is currently considering the introduction of the following Corporate Tax Incentives under Federal Decree-Law No. 47 of 2022.
To encourage R&D activities, foster innovation and economic growth within the UAE, a Research and Development (R&D) Tax Incentive is being considered. 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 1 January 2026.
The R&D tax incentive will be expenditure-based, offering a potential 30-50% 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 to the OECD’s Frascati Manual guidelines and will be required to be conducted within the UAE.
