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Key Tax Reforms in the UAE as Global Minimum Tax Rules Released

Key Tax Reforms in the UAE Global Minimum Tax Rules Released In 2023, the UAE introduced the global minimum tax (“GMT”)¹, also known as Pillar Two, to keep up with the international standards and its own commitment as part of the BEPS Inclusive Framework (“IF”). The UAE’s Ministry of Finance (“MoF”) recently announced a 15% GMT, effective from 1 January 2025. Additionally, the MoF have now released Cabinet Decision 142 of 2024² imposing a 15% domestic minimum top-up tax (“DMTT”) on UAE entities of a large multinational enterprise (“MNE”). Accompanying the Cabinet Decision, the MoF also released detailed rules prescribing the provisions, conditions and procedure to impose the DMTT in the UAE (“DMTT Rules”).

The Cabinet Decision 142 along with the DMTT Rules, is a complete legislation providing for the 15% charge, entities covered and excluded, computation of top-up-tax, availability of reliefs, procedural and compliance requirements to implement the DMTT on large MNEs. The rules are largely aligned with the OECD’s Pillar 2 Model Rules³ and it expressly acknowledges the use of Pillar 2 Commentary and administrative guidance for interpretation. It covers some additional provisions to align with the UAE’s tax landscape illustratively, provisions on penalties, clarifications, record keeping, general anti-avoidance rule (“GAAR”).

What does the release of the DMTT Rules means for MNEs present in UAE? What is the impact on the tax cost and administration of the new compliance for the UAE entities? What reliefs are available and how it can be claimed? What steps should in-scope MNEs take to ensure compliance?

This article endeavours to throw light on some of the above aspects and decipher the key provisions of the DMTT Law.

Download the article for key highlights of the DMTT Rules.

Footnotes:

1: Federal Decree-Law No. 60 of 2023 Amending Certain Provisions of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses [Source: www.mof.gov.ae]

2: Cabinet Decision No. 142 of 2024 on the Imposition of Top-Up Tax on Multinational Enterprises [Source: www.mof.gov.ae]

3: Tax Challenges Arising from Digitalization of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two) (2021) [Source: www.oecd.org]