UAE’s 15% Minimum Tax for Multinationals: Scope and Exemptions Explained
Amie Roberts • May 13, 2025
DMTT Scope & Exemptions Explained
Following our last article introducing the UAE’s 15% Domestic Minimum Top-Up Tax (DMTT)
for large multinational groups, this follow-up provides further information on which businesses fall within scope—and more importantly, which are exempt.
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What Is the DMTT?
To recap briefly, the Domestic Minimum Top-Up Tax is part of the UAE’s alignment with the OECD’s Pillar Two framework, ensuring that multinational groups pay a minimum effective tax rate of 15% in each jurisdiction where they operate. Rather than replacing existing UAE corporate tax, the DMTT works alongside it—applying only in cases where the effective rate falls below the global threshold.
What Has Been Clarified?
Exclusions for Smaller Entities
The DMTT only applies to MNE groups with global revenue exceeding €750 million. Standalone companies and smaller business groups remain unaffected.
No Retroactive Application
The tax will only apply from the 2025 financial year onwards, and assessments will not cover previous periods.
Treatment of Free Zone Income
While income from qualifying free zone activities may continue to enjoy a 0% rate, any income outside the scope of free zone benefits could still be subject to the DMTT.
Interaction With Existing UAE Corporate Tax
The standard 9% corporate tax introduced in June 2023 will continue to apply. The DMTT is designed to work alongside, not replace, the existing tax framework.
Implications for Business Planning
- Global Coordination: Multinational finance teams must now coordinate with UAE subsidiaries to ensure group-level compliance.
- Data Readiness: Companies need to gather and structure financial data across jurisdictions to meet reporting standards.
- Technology Upgrades: Tax reporting systems may need to be upgraded to handle the complexity of DMTT calculations and filings.
Practical Steps for UAE Businesses in Scope
For large international groups operating in the UAE, the DMTT introduces a new layer of tax planning and compliance obligations. Here’s what to focus on in the months ahead:
- Evaluate Group Revenue: Confirm whether your group exceeds the €750 million global threshold.
- Map UAE Operations: Identify all UAE-based entities and review their tax profiles, Free Zone status, and qualifying activities.
- Calculate Effective Tax Rate: Assess if your UAE operations will fall below the 15% threshold in 2025.
- Prepare for Reporting: Begin updating systems and processes to meet upcoming reporting and compliance requirements aligned with the OECD's global standards.
Should You Be Concerned if You’re Not an MNE?
For most UAE-based SMEs and family-owned firms, this tax will not apply.
However, if you are advising large groups or anticipate future growth to that level, it is worth understanding the new rules.
Conclusion
The additional guidance from the Ministry of Finance provides welcome clarity.
While many UAE-based businesses are outside the scope, those within should use the remainder of 2024 to prepare.
Our team can help you assess how the new rules apply and support your planning.
Get in touch today if your business or your clients operate as part of a global group.
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The UAE Ministry of Finance has announced a major policy shift that will affect large multinational corporations operating in the country. Starting from January 1, 2025, the UAE will implement a 15% Domestic Minimum Top-Up Tax (DMTT) for multinational enterprise (MNE) groups with global revenues exceeding €750 million. This move brings the UAE into alignment with the OECD's global minimum tax framework and signals a clear intent to strengthen its standing as a responsible international tax jurisdiction. What Is the 15% DMTT? The Domestic Minimum Top-Up Tax is a new concept introduced under the OECD's Pillar Two rules. It ensures that large multinationals pay at least a 15% effective tax rate on their profits, regardless of where those profits are booked. The goal is to reduce tax base erosion and profit shifting to low- or no-tax jurisdictions. Who Will Be Affected? The DMTT will apply to MNE groups that meet the following criteria: Have consolidated global revenues of €750 million or more in at least two of the four preceding financial years. Operate entities within the UAE. These businesses will be required to calculate their effective tax rate in the UAE and, if it falls below 15%, pay the difference. Why Is the UAE Implementing This? The UAE has traditionally been seen as a low-tax environment, which has contributed to its appeal as a regional headquarters hub. However, as international pressure grows for tax transparency and fairness, the UAE is aligning with global standards to: Maintain its reputation among international investors Avoid the risk of other countries imposing their own top-up taxes on UAE-based profits Prepare the economy for long-term resilience beyond oil revenues What Should Affected Businesses Do? Review Global Structures: Companies should analyse how profits are currently reported and whether their effective tax rates fall below the 15% threshold. Evaluate Substance and Transfer Pricing: Entities must demonstrate economic substance in the UAE, with accurate documentation to support intercompany transactions. Update Forecasts and Budgets: Financial models and tax projections for 2025 and beyond should incorporate the impact of DMTT. What about Freezones? While some activities in free zones can enjoy preferential tax rates, the new DMTT will still apply to MNE groups even if their UAE entities are in free zones, depending on group size and financial structure. Conclusion This new tax regime is a significant development in the UAE's fiscal policy. While it only targets the largest multinational groups, it reflects the broader shift towards responsible taxation and transparency. Final Thoughts If your business is part of a multinational group operating in the UAE, now is the time to prepare for the DMTT. We provide practical guidance on corporate tax structuring, economic substance, and global tax alignment. Whether you’re a group CFO or a professional adviser supporting one, we welcome the opportunity to work with you.