UAE's Notification on Minimum Tax Payment

Introduction

Effective January 1, 2025, the United Arab Emirates (UAE) have implemented major changes to its corporate tax framework. This includes raising the corporate tax rate for large multinational enterprises (MNEs) from the current 9% to 15%. This change is part of a global initiative for enhanced tax transparency and equity, in accordance with the Organisation for Economic Co-operation and Development's (OECD) Pillar Two framework. This adjustment will particularly affect multinational companies operating in the UAE that have consolidated global revenues exceeding €750 million in at least two of the past four financial years.

Key Details of the Tax Increase

The newly introduced Domestic Minimum Top-up Tax (DMTT) will apply specifically to MNEs that meet the €750 million revenue threshold (approximately $793 million). This measure ensures that these companies pay a minimum effective tax rate of 15% on profits generated within the UAE. The DMTT is part of the UAE's broader strategy to comply with international tax standards while preserving its appeal as a global business center.

The current 9% corporate tax rate, established in 2023, will still apply to businesses that do not meet the specified criteria, and exemptions will remain for entities operating in the UAE's free zones.

Alignment with Global Standards

This tax change reflects the UAE's commitment to aligning with the OECD's global minimum tax framework, which aims to combat base erosion and profit shifting by ensuring that large MNEs contribute their fair share of taxes. This move highlights the UAE's dedication to creating a fair and competitive business environment while participating in global tax reform efforts.

Amicus's Perspective

Amicus acknowledges the significance of this corporate tax change for multinational enterprises operating in the UAE. Businesses should proactively assess the potential effects on their tax obligations and operational strategies including Transfer Pricing. Our team of experts is ready to offer comprehensive guidance on compliance, tax planning, and optimizing operations within the revised tax landscape.

About Amicus

Amicus is legal and tax consulting firm with focus on corporate finance, re- structuring, private equity, international taxation, transfer pricing and goods and services tax. The Firm’s tax team also represents clients in assessments and litigation including Tax Tribunal and Higher Courts.

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