UAE to enforce 15% minimum tax on large multinationals starting January

Photo : Reuters

The United Arab Emirates (UAE) will introduce a new top-up tax of 15% on large multinational companies operating in the country starting in January. This tax, called the Domestic Minimum Top-up Tax (DMTT), is part of a global effort to ensure that big companies pay a fair amount of taxes and to prevent tax avoidance.

This initiative is part of an agreement led by the Organisation for Economic Co-operation and Development (OECD), signed by 136 countries, including the UAE. The deal ensures that multinational companies pay a minimum of 15% tax on their earnings in every country where they do business.

Who Will Be Affected?

The DMTT will apply to companies with a global revenue of at least 750 million euros (around $793.5 million) for at least two of the past four financial years. This new rule will mainly target large corporations operating in the UAE.

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Background on UAE Taxes

The UAE is known as a hub for multinational businesses in the Middle East. In 2022, the UAE introduced a 9% business tax, but many companies in the country’s free zones were exempt from this tax. Free zones play a significant role in the UAE’s economy, offering tax benefits and other incentives to businesses.

The new 15% tax will ensure that large companies contribute more to the country’s revenue, helping to boost income from sources other than oil.

Incentives for Businesses

To encourage certain activities, the UAE is planning to offer corporate tax incentives:

1. Research and Development (R&D) Incentives:
   • Starting from 2026, companies could get a refundable tax credit of 30%-50% for spending on research and development.
   • The exact percentage will depend on the size of the company and its revenue.
2. Employment Incentives:
   • Starting January 2025, companies may get tax credits for creating high-value jobs.
   • This incentive will be calculated based on the costs of eligible employee incomes.

Why Is This Important?

The new tax rules align the UAE with global standards and ensure that multinational companies pay their fair share in every country where they operate. These changes aim to make the UAE’s tax system fairer while maintaining its appeal as a business hub. At the same time, incentives for research and job creation show the UAE’s focus on supporting innovation and economic growth.

The UAE government hopes these measures will increase non-oil revenue while maintaining a favorable business environment for companies.