Abu Dhabi, UAE – The Ministry of Finance has announced the issuance of Cabinet Decision No. 142 of 2024 on the introduction of the Top-up Tax for Multinational Enterprises, providing further details on the UAE Domestic Minimum Top-up Tax (UAE DMTT). This follows the announcement made by the Ministry on December 9, 2024.
The UAE DMTT is closely aligned with the GloBE Model Rules issued by the Organization for Economic Co-operation and Development (OECD). The UAE DMTT will apply to Entities that are members of Multinational Enterprises (MNEs) operating in the UAE with annual global revenues of €750 million or more in the Consolidated Financial Statements of the Ultimate Parent Entity in at least two out of the four financial years immediately preceding the financial year in which the UAE DMTT applies.
The UAE DMTT provides relief through a Substance-based Income Exclusion, a carve out which reduces net Pillar Two income subject to the UAE DMTT to determine the Excess Profit for the purposes of computing the UAE DMTT, by an amount calculated based on payroll and the carrying value of tangible assets.
Aligned with the GloBE Model Rules, the UAE DMTT also allows for an exclusion where an Entity meets the relevant de minimis exclusion criteria, under which the UAE DMTT for an Entity will be considered zero, provided that certain criteria are met.
To bolster the UAE’s competitiveness as a leading investment hub, the UAE DMTT has been structured to exclude Investment Entities, as defined under these rules.
As part of a transitional measure and to create a tax environment conducive to economic growth, no UAE DMTT will be levied during the initial phase of an MNE Group’s international activity, provided that none of the of the ownership interests of the Entities located in the UAE are held by a parent entity subject to a Qualified Income Inclusion Rule in another Jurisdiction.
The UAE DMTT should be interpreted in line with the Commentary and Administrative Guidance issued by the OECD, available via this link. Cabinet Decision No. 142 of 2024 is available on the UAE Legislation’s website: www.uaelegislation.gov.ae/en.