The UAE is set to unveil a significant tax reform, introducing a Domestic Minimum Top-up Tax (DMTT) effective January 1, 2025. This new measure aims to align the country’s tax framework with international standards, ensuring large multinational enterprises contribute a fair share to the economy.
Boosting Fair Taxation for Multinationals
The DMTT applies to multinational enterprises (MNEs) with consolidated global revenues of €750 million or more in at least two of the last four financial years. These companies will be subject to a minimum effective tax rate of 15% on their profits earned within the UAE. This initiative reflects the UAE’s commitment to the OECD’s global tax agreement, which establishes equitable taxation practices and prevents profit shifting.
Supporting Economic Growth with New Incentives
To balance the tax reforms, the UAE Ministry of Finance is also considering incentives to stimulate growth, innovation, and employment:
Research and Development (R&D) Tax Credit
From 2026, businesses conducting qualifying R&D activities in the UAE may receive a 30–50% tax credit. This credit will cover expenditures related to innovation-driven projects, aligning with the UAE’s push for a knowledge-based economy.
High-Value Employment Tax Credit
Starting January 2025, businesses hiring C-suite executives and senior professionals in high-value roles can benefit from a refundable tax credit. This incentive promotes activities that deliver significant value to the UAE’s economy while encouraging global talent to relocate.
Enhancing the UAE’s Business Environment
The tax reforms and proposed incentives mark a pivotal shift in the UAE’s economic landscape. By aligning with global tax standards, the UAE aims to boost non-oil revenues and enhance its reputation as a prime destination for multinational corporations.
How Businesses Can Prepare
Businesses operating in the UAE should evaluate their eligibility for the DMTT and prepare to comply with the new tax framework. Additionally, companies should explore opportunities offered by the R&D and high-value employment tax incentives to optimize their operations and finances.
Stay Ahead of Tax Updates
As more details emerge, businesses should stay informed about the implementation process and legislative updates. The UAE’s tax reforms signify a future-focused approach to economic development, balancing fairness with innovation-driven growth.
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