The Finance Ministry has introduced Cabinet Decision No. 142/2024, detailing the new Top-up Tax for Multinational Enterprises, specifically the UAE Domestic Minimum Top-up Tax (UAE DMTT).

This follows a previous announcement made on 9 December 2024.

The UAE DMTT aligns with the GloBE Model Rules from the Organisation for Economic Co-operation and Development (OECD).

It targets entities within Multinational Enterprises (MNEs) operating in the UAE, with annual global revenues of €750 million or more, as reflected in the Consolidated Financial Statements of the Ultimate Parent Entity for at least two of the four financial years preceding the applicable financial year.

The tax offers relief through a Substance-based Income Exclusion, which reduces the net Pillar Two income subject to the UAE DMTT.

This is calculated based on payroll and the carrying value of tangible assets to determine Excess Profit for tax computation.

In line with the GloBE Model Rules, the UAE DMTT includes a de minimis exclusion, allowing an entity’s UAE DMTT to be zero if specific criteria are met.

To enhance the UAE’s appeal as an investment hub, Investment Entities, as defined by these rules, are excluded from the UAE DMTT.

As a transitional measure to foster economic growth, the UAE DMTT will not be applied during the initial phase of an MNE Group’s international activity, provided no ownership interests in UAE entities are held by a parent entity subject to a Qualified Income Inclusion Rule in another jurisdiction.

The UAE DMTT should be interpreted according to the OECD’s Commentary and Administrative Guidance.

Cabinet Decision No. 142/2024 can be accessed on the UAE Legislation’s website: www.uaelegislation.gov.ae/en.

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