UAE Announces 15% Corporate Tax for Multinationals Starting 2025

In a significant policy shift, the United Arab Emirates (UAE) has announced the implementation of a 15% corporate tax on large multinational enterprises (MNEs), effective from 1 January 2025. This move aligns the UAE with global tax standards and reflects its commitment to fostering a fair and transparent tax environment.

Scope and Implementation

The newly introduced Domestic Minimum Top-up Tax (DMTT) will apply to MNEs with consolidated global revenues of at least €750 million (approximately AED 3 billion) in two out of the four preceding financial years. These entities will be required to pay a minimum effective tax rate of 15% on profits generated within the UAE. This initiative is part of the UAE’s alignment with the Organisation for Economic Co-operation and Development’s (OECD) global minimum tax framework under Pillar Two, aiming to establish a fair and transparent global tax system.

Incentives for Growth and Innovation

Alongside the DMTT, the UAE’s Ministry of Finance is considering introducing tax incentives to support growth and innovation. Proposed measures include refundable tax credits for research and development (R&D) activities and high-value employment initiatives. The R&D tax incentive is expected to offer a potential 30-50% tax credit, refundable depending on the revenue and number of employees of the business in the UAE. These incentives are anticipated to take effect for tax periods starting on or after 1 January 2026, following legislative approval.

Implications for Businesses

The introduction of the DMTT signifies a substantial change in the UAE’s corporate tax landscape, particularly for large MNEs operating within its jurisdiction. While the UAE has been known for its low-tax environment, this move ensures compliance with international tax frameworks and supports global tax fairness initiatives. Businesses falling under the scope of this tax are advised to assess their tax structures and prepare for the upcoming changes to remain compliant and optimise their tax positions.
This development underscores the UAE’s dedication to aligning with global tax standards while fostering an environment conducive to economic growth and innovation.