UAE Corporate Tax Reform: Extended Timeline for Multinational Subsidiaries to Comply
N.R. Doshi & Partners | Auditors Business Consultants Tax Advisors
Auditors, Ta Advisors & Business Consultants since 1985 Affiliated with DFK International 6th largest Accounting Network
The UAE’s Ministry of Finance has provided businesses with ample time to align with the new Domestic Minimum Top-Up Tax (DMTT), set to take effect from January 1, 2025. This tax aligns with the OECD’s Pillar Two global minimum tax framework, targeting multinational enterprises (MNEs) with annual consolidated revenues exceeding 750 million euros.
Key Criteria for DMTT Applicability
Entities Exempt from DMTT
Certain organizations are excluded from the Domestic Minimum Top-Up Tax:
Notably, free zone businesses are not automatically excluded from the DMTT framework. As a result, qualifying free zone entities will be subject to the tax.
Tax Relief Through Substance-Based Income Exclusion
Companies with substantial operations in the UAE can reduce their taxable income through the substance-based income exclusion, which includes:
This encourages businesses to establish real economic activity rather than just a legal presence in the UAE.
Extended Filing Deadlines for Compliance
To ease the transition, the UAE has provided extended deadlines for filing DMTT-related tax returns:
Regional Developments
Other GCC countries, including Kuwait, Bahrain, and Oman, are also adopting similar OECD Pillar Two-aligned tax frameworks, ensuring consistency across the region.
This new tax regime ensures compliance with international tax standards while maintaining the UAE’s appeal as a business-friendly hub by offering extended compliance periods and tax relief for companies with substantial local operations.