The UAE Ministry of Finance has recently announced the confirmation of the Domestic Minimum Top up Tax (DMTT), set to take effect on January 1, 2025, for applicable businesses. This significant update to Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses reflects the UAE’s commitment to fostering economic growth, enhancing global competitiveness, and aligning with international tax frameworks. With this bold reform of confirming the Domestic Minimum Top up Tax in the UAE, the nation continues to strengthen its position as a global leader in economic innovation and regulatory excellence, paving the way for a more transparent and robust tax environment.

Introducing the Domestic Minimum Top Up Tax in the UAE

Following the issuance of Federal Decree Law No. 60 of 2023, the Domestic Minimum Top up Tax in the UAE will apply to multinational enterprises operating in the nation with consolidated global revenues of €750 million (Approx AED 3 billion) or more in at least two out of the four financial years immediately preceding the financial year in which the DMTT applies. The move reflects the UAE’s strong commitment to implementing the OECD’s Two-Pillar Solution, which sets a 15% minimum effective tax rate on profits.

This means MNEs operating in the UAE will need to pay an additional tax on their UAE profits, on top of the existing 9% corporate tax. The Domestic Minimum Top-up Tax in the UAE ensures that the nation is playing its part in creating a fair, transparent global tax system, making the country an even more attractive and compliant place for multinational operations.

Tax Incentives to Fuel Innovation and Growth

But it’s not all about Domestic Minimum Top up Tax in the UAE or other taxes – the nation is also working hard to keep businesses ahead of the curve. The Ministry of Finance is also gearing up to introduce corporate tax incentives designed to boost innovation, investment, and economic growth in the country.

R&D Tax Credit: A Game Changer for Innovators

The UAE is preparing to roll out an ambitious Research and Development (R&D) Tax Incentive in 2026. This initiative offers businesses a 30-50% refundable tax credit on qualifying R&D expenditures, providing a robust platform for fostering innovation and technological advancement.

Designed to align with the globally recognized OECD Frascati Manual guidelines, the program ensures that R&D activities meet international benchmarks. By encouraging investment in high-impact, future-focused projects, the UAE aims to solidify its position as a global leader in research and innovation, driving sustainable growth and attracting top-tier talent and enterprises.

High-Value Employment Tax Credit: Rewarding Top Talent

In another development, the UAE is introducing a tax credit for high-value employment activities starting January 1, 2025. This incentive will reward businesses that employ senior talent, including C-suite executives and senior personnel who drive innovation and deliver significant value to the UAE economy. The credit will be a percentage of the eligible salary costs, supporting businesses in attracting and retaining the best and brightest minds.

Along with the Domestic Minimum Top up Tax in the UAE, these tax updates mark a significant shift in the UAE’s corporate tax landscape, reinforcing the country’s commitment to being a global business powerhouse. The final details of these changes will be shared soon by MoF, but businesses should start preparing now to take full advantage of the upcoming reforms and incentives.

Stay Ahead with MS: Simplifying Domestic Minimum Top Up Tax in the UAE and Beyond

Domestic Minimum Top up Tax in the UAE and R&D Tax Incentives are just one part of the evolving tax reforms in the UAE. At MS, we make it easy for you to stay ahead of these changes. Our expert team helps you understand these changes seamlessly, ensuring compliance while unlocking growth opportunities. We provide tailored solutions that turn tax challenges into a competitive advantage. Partner with MS to stay updated, compliant, and ready for the future.