UAE to impose 15% minimum top-up tax on large multinationals from January

Dubai: From January 2025, the Emirates will start imposing a minimum top-up tax of 15% on established multinational companies conducting operations in the nation. This big announcement was made by the finance ministry of the country on December 9 with a focus on increasing the revenue generated from the non-oil sectors. 

This announcement is aligned with the OECD (Organisation for Economic Cooperation and Development) initiative of reforming global tax policies, which was done to ensure fair taxes paid by multinational companies operating in any foreign country other than their home countries. 

DMTT: A Significant Part of the OCED Global Tax Reformation

The Domestic Minimum Top-up Tax (DMTT), consisting of 136 signatories, including the Emirates, is a significant part of the OECD’s global minimum tax agreement. This agreement was drafted and implied to ensure the established multinational companies operating in the nation pay a fair and minimum share of 15% top-up tax, which has made tax evasion harder. 

According to this significant change made in the amendments of corporate tax law by the UAE finance ministry, the DMTT will apply to those multinational companies in the country that have a united global revenue of $793.50 million or more in two out of four financial years preceding the present year, when this change has been announced and made.

The glittering emirate Dubai and other emirates of the UAE are prominent Middle Eastern markets for international companies from all over the globe. This change to the corporate tax laws comes a year after the UAE government started a 9% tax implementation on companies with exemptions for several free zones to empower its economy.

Future Plans:

DMTT is influenced by the OECD’s clear statement that large multinational companies operating in any foreign country other than their home country must pay an effective minimum rate of 15% tax on the profits they gain from their operations in that particular nation. 

Another statement from the UAE finance ministry has clarified its intention to implement several tax incentives that will be introduced for tax periods beginning in 2026. Among these incentives, one will be for the R&D (Research and Development) sector. 

Based on the size and revenue of the multinational corporation operating in the Emirates, this expenditure-based incentive would offer a 30 to 50 percent refundable tax credit, this statement was added by the ministry. 

The ministry said a refundable tax credit for companies that indulge in high-employment activities is also being considered and will be applied as early as January 2025. These significant announcements by the UAE finance ministry can be marked as a new milestone in the Emirates’ commitment to building a stronger economy.

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