Introduction
Starting from January 1, 2025, the United Arab Emirates (UAE) will implement significant changes to its corporate tax regime. This adjustment involves raising the corporate tax rate for large multinational enterprises (MNEs) from the current 9% to 15%. The move aligns with the global push for tax transparency and fairness under the Organisation for Economic Co-operation and Development’s (OECD) Pillar Two framework. This development is set to impact multinational companies operating within the UAE, particularly those with consolidated global revenues exceeding €750 million in at least two of the last four financial years.
Key Details of the Tax Increase
The newly introduced Domestic Minimum Top-up Tax (DMTT) applies specifically to MNEs meeting the revenue threshold of €750 million (approximately $793 million). This measure ensures that such enterprises pay a minimum effective tax rate of 15% on profits earned within the UAE. The DMTT is part of the UAE’s broader strategy to adhere to international tax standards while maintaining its attractiveness as a global business hub.
The existing 9% corporate tax rate, introduced in 2023, remains applicable to businesses not meeting the specified criteria, with exemptions continuing for entities operating within the UAE’s free zones.
Alignment with Global Standards
This tax amendment represents the UAE’s commitment to aligning with the OECD’s global minimum tax framework. The framework aims to combat base erosion and profit shifting by ensuring large MNEs pay their fair share of taxes. The move underscores the UAE’s dedication to fostering a fair and competitive business environment while contributing to global tax reform efforts.
Eurofast’s Take
Eurofast recognizes the implications of this corporate tax adjustment for multinational enterprises operating in the UAE. Businesses should proactively evaluate the potential impact on their tax liabilities and operational strategies. Our team of experts is equipped to provide comprehensive guidance on compliance, tax planning, and optimizing operations under the revised tax framework.
For further queries contact us at dubai@eurofast.eu