The United Arab Emirates (UAE) has enacted Cabinet Decision No. 142 of 2024, introducing a Domestic Minimum Top-up Tax (DMTT) for multinational enterprises (MNEs). This measure aligns with the Organisation for Economic Co-operation and Development’s (OECD) Pillar Two framework, establishing a 15% global minimum tax rate for large international corporate groups.

Key Details of the DMTT

1. Scope and Applicability: The DMTT applies to entities within MNEs operating in the UAE with annual global revenues of €750 million or more in at least two of the four preceding financial years. Exemptions include government entities, investment entities, non-profit organizations, and certain business structures based on their function and ownership composition. The decision shall apply and take effect on Fiscal Years starting from January 1, 2025.
2. Guidance on determination of income and tax figures: Clarifications have been provided regarding the calculation of Pillar Two liability, covering aspects such as income or loss determination, the quantification of adjusted covered taxes, and the implementation of transitional safe harbors for country-by-country (CbC) reporting, as well as simplified calculation safe harbors.
3. Reporting Requirements: Entities subject to the DMTT must register themselves with the Federal Tax Authority (FTA). The deadline for such registration is yet to be determined. Further, such entities must file a detailed top-up tax return and pay the tax liability not later than 15 months from the financial year or 18 months after the transitional year.

This development underscores the UAE’s commitment to international tax standards and aims to enhance the country’s competitiveness as a leading investment hub.

For comprehensive details, refer to the UAE Ministry of Finance’s official announcement- Click Here