DUBAI: From January 1, the United Arab Emirates (UAE) will implement a domestic minimum top-up tax (DMTT) of 15 per cent on large multinational companies, marking a significant shift in the nation’s fiscal landscape.
Announced by the finance ministry, this initiative aligns the UAE with the OECD’s global minimum corporate tax framework, which aims to curtail tax avoidance by ensuring that substantial corporations contribute a fair share of tax revenue.
The DMTT targets multinational enterprises with consolidated global revenues surpassing 750 million euros (approximately $793.50 million) during at least two of the four preceding financial years. The regulatory amendment comes in the context of the UAE’s broader efforts to diversify its economy beyond oil dependency, enhancing non-oil revenue streams. The country has long been recognised as a pivotal hub for multinational corporations in the Middle East, and this tax adjustment will further solidify its role in the global economic order.
Corporate tax incentives on radar
This move follows the introduction of a 9 per cent business tax last year, which included exemptions for various free zones pivotal to the UAE’s economic framework. While the DMTT increases the tax burden on large corporations, the UAE government has expressed intentions to introduce corporate tax incentives aimed at bolstering sectors such as research and development (R&D).
By providing refundable tax credits of 30 per cent-50 per cent based on company size and revenue, the UAE aims to foster innovation and high-value employment while still adhering to international taxation standards.
Proposals for these incentives, including a tax credit tied to eligible employee costs, are under consideration and reflect the UAE’s commitment to creating a competitive business environment. However, these initiatives remain contingent upon legislative approval, emphasising the need for careful regulatory navigation.
