Abu Dhabi [UAE], December 10: The UAE Ministry of Finance has introduced significant updates to Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. Key changes include the introduction of a Domestic Minimum Top-up Tax (DMTT) and a series of tax incentives aimed at promoting growth, innovation, and global competitiveness.
Key Updates
1. Domestic Minimum Top-up Tax (DMTT)
Effective for financial years starting on or after January 1, 2025, the DMTT aligns the UAE with the Organisation for Economic Co-operation and Development’s (OECD) global tax standards under the Two-Pillar Solution. This initiative ensures large multinational enterprises (MNEs) operating in the UAE pay a minimum effective tax rate of 15% on profits.
- Applicable to MNEs with consolidated global revenues of EUR 750 million or more in at least two of the four financial years preceding the tax year.
- Closely aligned with the OECD’s GloBE Model Rules, this step reinforces the UAE’s commitment to fair and transparent taxation.
Further legislative details are expected from the Ministry of Finance soon.
2. Tax Incentives to Drive Growth and Innovation
The Ministry of Finance is proposing new incentives to enhance the UAE’s business-friendly environment, foster economic growth, and encourage investment. These include:
- R&D Tax Incentive (Effective January 1, 2026):
- Aimed at encouraging research and development within the UAE.
- Businesses may receive a 30-50% refundable tax credit based on qualifying expenditures, aligned with OECD’s Frascati Manual guidelines.
- Tax Credit for High-Value Employment Activities (Effective January 1, 2025):
- Designed to attract and retain top-tier talent in the UAE.
- Provides a refundable tax credit as a percentage of eligible salary costs for senior personnel in roles that deliver substantial economic benefits.
The implementation of these incentives remains subject to legislative approvals, with more details to be issued by the Ministry of Finance.
Strategic Vision for the UAE
These measures reflect the UAE’s commitment to its strategic objectives of strengthening economic competitiveness, fostering innovation, and aligning with international tax standards. Businesses are encouraged to prepare for these upcoming changes to leverage the benefits effectively.