UAE to Introduce Domestic Minimum Top-up Tax and Business Incentives in 2025

A Domestic Minimum Top-up Tax (DMTT) will take effect in the UAE from 1st January, 2025 in that country’s embrace of the OECD’s international taxation system. The initiative is in par with the UAE’s policy regimes that support reasonable taxation for a favourable business environment besides stimulating innovation and economic development.

The DMTT will relate to MNEs with total operations in the UAE and global revenues of €750 million ($794 million) or over in at least two of the previous four financial years. It requires those companies to pay a minimum of 15% corporate tax on solid profits in every country they are operating in. This corresponds with the OECD’s Pillar Two rules under the Two-Pillar Solution to the global tax challenges.

Besides, DMTT, Ministry of Finance of UAE is considering the notion of corporate tax benefits for innovation and high skill employment. Proposed incentives include:

• R&D Tax Credit: Primarily targeting encouraging R & D activities in the country this credit allows 30%- 50% of tax credit for activities that qualify as R & D to be conducted within UAE. It is expected to apply from the tax periods starting from January 1, 2026.
• High-Value Employment Tax Credit: Starting in 2025, this aims at giving refundable tax credits on eligible salary costs of the top executives that significantly contribute to the economy.

These measures seek to improve the relative competitive position of UAE in the global economy, facilitate inflow of investments and promote sustainable development. The Ministry of Finance will share further legislative information in the coming days which will provide more clarity to the concern businesses to how the same has to be implemented.

Through these tax reforms the UAE seeks to strengthen its reputation as the international hub of innovation, economic growth and business excellence.