UAE Corporate Tax: The UAE will begin implementing Pillar Two from January 1, 2025.
The UAE has implemented a Domestic Minimum Top-up Tax (DMTT) in the country under Cabinet Decision No. (142) of 2024. The Cabinet Decision's goal is to ensure that multinational enterprises (MNEs) that conduct business in the United Arab Emirates pay a minimum tax on their profits in accordance with the Organization for Economic Co-operation and Development's (OECD) Pillar Two Model Rules. Multinational enterprises ("MNEs") that fall within Pillar Two of the OECD Global Anti-Base Erosion ("GloBE") Model Rules will be subject to the DMTT, which will be enforced when the MNE's effective tax rate ("ETR") in the United Arab Emirates is less than 15%.
MNE groups that operate in the UAE and have consolidated annual revenues of €750 million or more in two of the previous four fiscal years are subject to the DMTT. The DMTT imposes a top-up tax on low-taxed UAE firms, ensuring a minimum effective tax rate (ETR) of 15% in the UAE, with effect from financial years commencing on or after January 1, 2025.
The DMTT Rules include information on the Top-up Tax calculation process, the extent and terms of Covered Taxes, the need for accounting standards, several exceptions, specific administrative and compliance issues, and liability clauses. The DMTT Rules are mostly in line with the GloBE Model Rules.
With the DMTT in effect, multinational enterprises must think about how it will affect their current tax profiles and compliance requirements in the UAE. MNE Groups must take a variety of actions promptly to determine if they are regulated by the DMTT Rules, including completing the necessary disclosures for the 2024 fiscal year, registration if necessary, and making plans for the interim and year-end compliance obligations for 2025. This also involves studying their transfer pricing guidelines and making sure that they are followed on time all year through.
If you need any professional advise/ guidance regarding UAE CT and VAT, you may please contact our Tax Department:
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