The UAE government is poised to impose a new tax aimed at multinational companies functioning inside its borders, mandating minimum effective tax rates of 15 percent on profits of big companies.

Announced by the Ministry of Finance, the Domestic Minimum Top-up Tax (DMTT) would be used for financial years starting on or following January 1, 2025, This action must correspond with world standards and establish a fair and transparent tax system.

Tax's Scope

Multinational companies (MNEs) with consolidated global revenues of at least €750 million (about AED 300 billion) in two or more of the four financial years immediately before the year of applicability will be covered by the DMTT. The legislation, which aims to guarantee a worldwide minimum tax rate for big businesses, underlines UAE's dedication to the Two-Pillar Solution of the Organisation for Economic Co-operation and Development (OECD), stressed the Ministry of Finance, The Ministry will provide further specifics on the legislation in due time.

The UAE's more general plan to improve its economic competitiveness and business-friendly environment includes this tax change, The UAE wants to strengthen its image as a clear and appealing base for foreign companies by using internationally accepted tax criteria, Moreover these policies complement national strategic goals like encouraging sustainable economic development and streamlining of company processes.

Under Federal Decree-Law No. 47 of 2022 the UAE is also contemplating providing company tax incentives in order to promote innovation and sustainable growth, These incentives seek to draw money, advance R&D, and improve economic competitiveness by means of attraction of investments.

One such project is a planned R&D tax incentive meant to inspire companies to carry out research projects inside the United Arab Emirates Expected to start for tax years starting on or after January 1, 2026, this incentive would offer expenditure-based tax credits of 30 to 50 percent. The income and workforce of the UAE company will determine refundability. Qualifying events have to be carried out locally and follow OECD Frascati Manual recommendations.

Employment Tax Credit with High Value

Another suggested incentive consists in refundable tax credits meant for high-value employment projects, Starting on January 2, 2025, this program would honor companies using top executives in jobs that greatly boost UAE economy, Tax credits would be taken into account for qualified expenses including wages for C-suite executives and other top professionals handling basic business operations, This initiative aims to boost creativity, generate wealth, and support the UAE's standing as a competitive worldwide corporate base.

Dedication to Global Norms

These tax laws and incentives demonstrate UAE's will to create a balanced economic environment compliant with world tax norms. Combining low tax rates for big multinational companies with tailored incentives for innovation and high-value jobs helps the UAE build a vibrant business ecosystem guaranteeing conformity with world standards and stimulates development.

Although legislative approvals will determine the ultimate use of these incentives, they show a proactive attitude to reach sustainable economic goals, Businesses running in the UAE are advised to get ready for these major changes in the national tax system as more specifics become clear.