Effective 1 January 2025, the United Arab Emirates will implement a new tax policy under which very large multinational enterprises may pay an effective tax rate of 15 percent on their profits under the provisions of the DMTT.
Key Features of DMTT
According to the Ministry of Finance of the United Arab Emirates, the DMTT is intended to create an equitable and transparent tax system consistent with international standards. This tax will impact multinational corporations having consolidated worldwide revenues at least equal to €750 million – approximately AED 300 million- in two of the four financial years preceding such taxable year. More details will soon be provided by the Ministry of Finance.
Also Read: Shahid Afridi Criticizes Shaheen Afridi Captaincy Decision
Align with Global Standards
This new tax was, additionally, developed under the OECD’s Two-Pillar Solution, declaiming the UAE’s effort to continually strengthen global competitiveness in a business-friendly regime.
Proposed Corporate Tax Introduced Incentives
Under Federal Decree-Law No. 47 of 2022, the Ministry of Finance is even considering additional corporate tax incentives that will spur innovation and support sustainable growth with high-value employment for the citizens:
- R&D Tax Incentive
- A research and development (R&D) tax incentive is conceived to spur innovation and economic growth.
- Implementation: Expected to start for tax periods beginning on or after January 1, 2026.
- Scope: According to the OECD Frascati Manual, qualifying R&D activities must be conducted in the UAE.
- Incentive Description: Businesses may receive a tax credit for expenditures ranging from 30 to 50 percent, refundable depending on revenue and number of employees.
2. Tax Incentive for High-Value Employment
This refundable tax credit is intended to encourage businesses to create high-value jobs in the United Arab Emirates.
- Execution: Proposed effective on January 2, 2025.
- Qualified: Targets C-suite and senior officials in critical activities contributing to the UAE economy substantially.
- Incentive Particulars: A percentage of qualifying salary expenses will be provided as a tax incentive.
Betterment of Competitiveness in Economics
The introduction of DMTT and proposed tax incentives is consistent with the direction that the UAE holds globally for tax practice while enhancing innovation and, in particular, enabling business growth. The introduction and implementation of these benefits are subject to legislative approval.