The new tax, part of global reforms, aims to boost non-oil revenues and ensure fair corporate taxation

Starting in January 2025, the UAE will implement a 15% minimum top-up tax (DMTT) on large multinational companies. This measure, announced by the UAE Finance Ministry, is designed to align the country with global tax reforms and help diversify the UAE’s economy away from oil dependency.

The DMTT is part of the OECD’s global minimum corporate tax agreement, which has been endorsed by 136 countries, including the UAE. The move is intended to curb tax avoidance by ensuring that large corporations contribute a minimum effective tax rate of 15% on profits they earn in each jurisdiction where they operate.

The new tax law will apply to multinational companies with consolidated global revenues of €750 million ($793.5 million) or more, provided they meet this threshold for at least two out of the four financial years leading up to the tax’s implementation.

Bal Krishen, chairman of Century Group, explained that the introduction of the DMTT marks the UAE’s transition from a tax haven to a low-tax jurisdiction, following the introduction of a 9% corporate tax rate in 2023. He noted that despite the 15% tax, the UAE remains competitive compared to other countries like the UK, which have higher corporate tax rates.

The move reflects the UAE’s broader strategy to boost non-oil revenue as part of its economic diversification efforts. The country has long been dependent on oil exports, but is now seeking to strengthen other sectors, including finance and technology, to secure sustainable growth.

In addition to the new minimum tax, the UAE’s Finance Ministry has indicated that it is considering introducing several corporate tax incentives aimed at further stimulating business activity. One such incentive focuses on research and development (R&D), which could provide tax credits of 30% to 50% for qualifying companies starting in 2026. This expenditure-based incentive would be refundable and dependent on the size and revenue of the company.

Moreover, the ministry is exploring another refundable tax credit for companies that engage in high-value employment activities, which could take effect as early as January 1, 2025. This credit would be based on eligible employee income costs.

These proposed incentives, still subject to legislative approval, underscore the UAE’s commitment to remaining an attractive destination for international business, despite the new tax regulations. By offering targeted incentives in key areas such as R&D and employment, the UAE hopes to retain its competitiveness while enhancing its economic resilience and tax fairness.

The introduction of the DMTT and the exploration of further tax incentives mark significant steps in the UAE’s broader tax reform efforts, reflecting its desire to meet international standards and boost revenues as it continues its diversification away from oil.