Most UAE businesses pay Corporate Tax at 9%, and some free zone businesses pay 0% on qualifying income. For the largest multinational groups, however, there is now an additional layer: a Domestic Minimum Top-up Tax (DMTT) designed to ensure their profits in the UAE are taxed at an effective rate of at least 15%.
The DMTT is the UAE’s implementation of the OECD’s global minimum tax rules, commonly known as Pillar Two.
The legal basis and start date
The DMTT was introduced by Cabinet Decision No. 142 of 2024 and applies to financial years starting on or after 1 January 2025.
Who is in scope
The DMTT applies to members of multinational enterprise (MNE) groups with consolidated group revenue of at least EUR 750 million in at least two of the four preceding financial years. It applies whether the group is headquartered in the UAE or elsewhere.
Within an in-scope group, the rules apply to UAE constituent entities (entities and permanent establishments consolidated in the group’s financial statements), and can also extend to certain joint ventures.
If your group is below the revenue threshold, the DMTT does not apply, and your UAE Corporate Tax position is unchanged.
How it works
For each in-scope group, the effective tax rate on UAE profits is calculated using the Pillar Two rules, which differ from the ordinary Corporate Tax calculation. If that rate is below 15%, a top-up tax is payable in the UAE to bring it up to 15%.
This is particularly relevant for:
- free zone entities benefiting from the 0% rate on qualifying income, which may now face top-up tax at group level; and
- groups with significant tax incentives or exempt income, which can reduce the effective rate below the minimum.
Registration, returns and payment
In-scope entities, or a designated filing entity on behalf of the group, must register with the Federal Tax Authority within the deadline it sets. The top-up tax return must be filed, and the tax paid, within 15 months of the end of the financial year, extended to 18 months for the first (transition) year.
For a group with a calendar financial year, that means the first DMTT return, for 2025, is due by 30 June 2027.
What in-scope groups should be doing now
- Confirm scope. Check consolidated revenue over the relevant years and map every UAE entity, branch and joint venture in the group.
- Model the effective tax rate. Estimate the UAE effective rate under the Pillar Two rules to understand whether top-up tax is likely and how much.
- Review the data. Pillar Two calculations need detailed information that is often not captured in local accounting systems. Identify gaps early.
- Revisit free zone and incentive planning. Arrangements that made sense under the 9% and 0% rates may need rethinking if top-up tax applies.
- Coordinate with group tax. The DMTT interacts with Pillar Two rules in other countries where the group operates, so UAE work should be aligned with the group’s wider approach.
In summary
The DMTT affects only the largest groups, but for those groups it can change the UAE tax position significantly, especially where free zone benefits are involved. The first return deadline may seem distant, but the data and modelling work needs to start well before then.
If your group may be in scope and you would like help assessing the impact, please get in touch.
This article is general information based on the rules as we understand them at the date of publication. It is not advice on your circumstances. Laws and practice change, so please speak to us before acting on it.
