UAE introduces 15% tax on profits for multinational corporations

By Alimat Aliyeva

The United Arab Emirates (UAE) will introduce an internal minimum income tax (Domestic Minimum Top-up Tax, DMTT) of 15% for large multinational companies operating in the country, Azernews reports.

According to amendments to the corporate tax law, the DMTT will apply to enterprises with consolidated annual revenue exceeding 750 million euros. Additionally, the tax will be applicable if the relevant income of multinational companies was generated in at least two of the four financial years preceding the tax's implementation.

The UAE has long been a key hub for international corporations in the Middle East, attracting businesses with its favorable environment, including tax exemptions. However, last year, the government introduced a corporate tax rate of 9% for companies with annual profits exceeding 375,000 dirhams (around $102,000). Notably, this tax did not affect many free economic zones, where most international companies are registered.

The Ministry of Finance is also considering corporate tax incentives, particularly for research and development (R&D) activities, which could be implemented as early as 2026. Companies investing in R&D would be eligible for tax credits ranging from 30-50%, and may also be able to recover part of their tax payments.

The new tax regulations signal the UAE's alignment with the global anti-offshore initiative led by the Organization for Economic Cooperation and Development (OECD), launched in 2021. To date, 136 countries have supported the OECD's global tax reform. The reform is structured around two key pillars:

Pillar 1 focuses on introducing a minimum corporate income tax rate of 15%, aimed at curbing the competitive advantage of low-tax jurisdictions.
Pillar 2 targets multinational corporations, stipulating that taxes will be paid not in the countries where companies are registered, but rather where they operate and generate profit.
These measures are part of a broader global trend towards greater tax transparency and the reduction of tax avoidance by multinational corporations. The UAE’s decision reflects its commitment to comply with international tax standards, even as it seeks to maintain its attractiveness as a global business hub.

As the UAE adapts to these global shifts, it will be interesting to see how other tax incentives and regulatory changes evolve in the coming years, particularly as businesses weigh the benefits of operating in one of the region's most competitive markets.