Abu Dhabi: The UAE Ministry of Finance has announced significant updates to Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.
The amendments include the introduction of a Domestic Minimum Top-up Tax (DMTT) and new tax incentives aimed at fostering growth and innovation.
Domestic Minimum Top-up Tax (DMTT)
Effective from financial years starting on or after 1st January 2025, the DMTT will apply to large multinational enterprises (MNEs) operating in the UAE with consolidated global revenues of €750 million (AED 3 billion) or more in at least two of the four financial years preceding its application.
This initiative aligns with the Organization for Economic Co-operation and Development’s (OECD) Two-Pillar Solution, ensuring that MNEs pay a minimum effective tax rate of 15 percent on profits in every country they operate.
The UAE’s adoption of the DMTT through Federal Decree Law No. 60 of 2023 underscores its commitment to establishing a transparent, equitable tax framework in line with global standards.
The #MoFUAE has announced updates in relation to certain provisions of Federal Decree-Law No47 of 2022 on the Taxation of Corporations and Businesses aiming to enhance the business environment in the UAE and promote greater compliance with global standards for tax transparency pic.twitter.com/aX02JN8msT
— وزارة المالية | الإمارات (@MOFUAE) December 9, 2024
Tax Incentives
To enhance its business-friendly environment and drive sustainable economic growth, the Ministry of Finance is exploring key tax incentives under Federal Decree-Law No. 47 of 2022.
- R&D Tax Incentive:
- Aims to encourage research and development activities within the UAE.
- Proposed to take effect from 1st January 2026.
- Offers a 30-50 percent expenditure-based tax credit, potentially refundable, depending on a business’s revenue and workforce size in the UAE.
- Aligns with OECD’s Frascati Manual for qualifying R&D activities conducted locally.
- Tax Credit for High-Value Employment:
- Targets businesses employing senior personnel in high-value roles.
- Scheduled to commence on 1st January 2025.
- Provides refundable tax credits based on eligible salary costs for C-suite executives and other strategic roles contributing to the UAE’s economic competitiveness.
The proposed incentives are subject to legislative approval, with further details and guidelines to be provided by the Ministry of Finance.