The implementation of the 15% Domestic Minimum Top-up Tax (DMTT) has marked an essential change in terms of corporate taxation in the United Arab Emirates (UAE). Multinational groups functioning within the territory of the state are required to evaluate the applicability of the global minimum tax system and whether any extra tax responsibilities arise.

Domestic Minimum Top-up Tax in UAE is a tool that guarantees the payment by multinational enterprise groups of the minimum effective tax rate, amounting to 15% on their income in each jurisdiction where the rule applies. It is consistent with the OECD Pillar Two framework.

Not all companies functioning in the UAE will have to pay a tax under the new ruling. The applicability of the tax largely depends on the annual consolidated revenue, ownership and effective tax rate of the business.

This article explains how the 15% tax works, what companies it affects, the way the tax is calculated and how businesses can prepare themselves for compliance.

What Is the Domestic Minimum Top-up Tax in UAE?

The Domestic Minimum Top-Up Tax is a form of tax that was introduced in the UAE to comply with the Global Anti-Base Erosion Model Rules, or Pillar Two, as stipulated by the OECD.

Under these regulations, the qualifying multinational enterprises are required to have an effective minimum tax rate of 15% in all jurisdictions in which they conduct their activities.

If the effective minimum tax rate in the operations of the qualifying enterprise in the UAE is below 15%, a top-up tax would apply.

The Domestic Minimum Top-Up Tax was introduced by the UAE through Cabinet Decision No. 142 of 2024, and the guidelines will apply from 1 January 2025.

The primary objectives include:

• Ensuring multinational conglomerates pay a minimum amount of tax.
• Reducing tax competition via extremely low tax rates.
• Ensuring international tax transparency and cooperation.
• Making the UAE comply with international tax standards.
• Decreasing opportunities for profit shifting across borders.

Whereas normal corporate tax usually applies to taxable income under UAE Corporate Tax Law, the DMTT uses special calculations of GloBE in determining whether extra taxes are applicable.

Which Companies Are Affected by the UAE Domestic Minimum Top-up Tax 15%?

The UAE Domestic Minimum Top-up Tax 15% mainly targets UAE member companies of big multinational groups having reached the worldwide income limit.

The main eligibility condition is:

€750 million or more in consolidated annual revenue in at least two of the four financial years immediately preceding the tested financial year.

For instance, where a multinational company runs its subsidiaries in the UAE, the income generated by the entire multinational company will be taken into account in making the determination of the threshold instead of that of its subsidiary in the UAE.

1. Large Multinational Enterprise Groups

Multinational companies operating across several countries are the key businesses that are impacted by the DMTT. For instance, a multinational company based in Europe with branches operating in the UAE, Singapore, and the United States may be bound by the rules provided that it meets the revenue requirement.

In this case, its constituents in the UAE will have to determine their tax rate as per Pillar Two.

2. UAE Subsidiaries of Foreign Parent Companies

It is possible for an Emirates-based subsidiary to be exposed to the Domestic Minimum Top-up Tax despite generating relatively lower income.

This is due to the fact that the determination will be based on the total income generated by the multinational business.

This means that foreign-based parent firms should check their subsidiaries based in the Emirates to see whether they qualify.

3. UAE-Based Multinational Groups

These regulations will also apply to multinational groups based in the UAE but doing business through subsidiary companies, branches, or other qualifying organizations outside the UAE.

If the multinational company has revenues above the consolidated threshold, the UAE entities belonging to it could be subject to the domestic minimum tax requirements.

4. Groups With an Effective Tax Rate Below 15%

Multinationals that qualify and have a UAE effective tax rate less than 15% may need to meet other tax requirements.

For instance, some tax benefits and the difference between the accounting income and taxable income can lead to a GloBE effective tax rate lower than the minimum level.

But the calculation depends on the actual GloBE guidelines and not just the UAE Corporate Tax Rate.

How Is the 15% Domestic Minimum Top-up Tax Calculated?

UAE DMTT is calculated using the OECD’s approach to Global Anti-Base Erosion (GloBE). The computation identifies if the UAE activities in relation to an in-scope multinational entity have attained the minimum effective tax rate of 15%.

It is not calculated just by looking at the standard corporate tax rate. The calculation takes into account adjusted income, eligible taxes and deductions under the GloBE guidelines.

Step 1: Calculate GloBE Income

It begins by establishing the GloBE income or loss that the group earns from its UAE constituent entities.

In most cases, the starting point will be accounting income, which will then be adjusted in accordance with the requirements of the GloBE.

This includes, among others, certain excluded dividends, equity gains/losses, etc.

Step 2: Determine Adjusted Covered Taxes

The next stage will be the computation of the adjusted covered taxes in relation to the UAE organizations.

These usually cover qualifying corporate income taxes as well as some deferred taxes.

Step 3: Calculate the Effective Tax Rate

The effective tax rate is calculated using the following formula:

Effective Tax Rate = Adjusted Covered Taxes ÷ GloBE Income × 100

For example, if a qualifying multinational group’s UAE operations have GloBE income of AED 10 million and adjusted covered taxes of AED 1 million, its illustrative effective tax rate would be:

• GloBE income: AED 10,000,000
• Covered tax amount: AED 1,000,000
• Effective tax rate: 10%

This means the effective tax rate is below the required 15% minimum.

Step 4: Determine the Top-up Tax

If the effective tax rate is below 15%, the group may have to pay additional tax.

The top-up tax rate is generally calculated as:

Top-up Tax Rate = 15% − Effective Tax Rate

However, this final amount of the top-up tax does not have to be computed using this margin on all GloBE income. Other factors to be considered under the GloBE framework include the substance-based income exclusion as well as any other adjustments, if there are any.

As an illustration, if the top-up tax rate for the group is 5% and the excess profit is AED 8 million without any other adjustments, then the top-up tax is AED 400,000.

Does the UAE Corporate Tax Rate of 9% Affect DMTT?

Yes. There is a relationship between the standard rate of corporate tax in the UAE and the Domestic Minimum Top-up Tax, but these have distinct ways of calculation.

The standard rates of UAE Corporate Tax include:

• 0% on taxable income up to AED 375,000.
• 9% on taxable income exceeding AED 375,000, subject to applicable rules.

For such multinational corporations that meet the requirements, the 15% global minimum tax regime will require one more criterion.

The fact is that even if the company pays 9% corporation tax, it does not necessarily mean that it complies with the minimum 15% tax requirement. Yet, the GlobE effective tax rate needs to be estimated separately.

What should be kept in mind is that the DMTT is not just an extra 6% for every corporation’s corporation tax burden.

Are Free Zone Companies Affected by the 15% DMTT?

The corporations incorporated in the Free Zones cannot be automatically excluded from the DMTT rules.

UAE Free Zone bodies will be eligible for the 0% corporate tax rate on qualifying income in case they meet all the conditions to qualify for Qualifying Free Zone Person.

Nevertheless, qualifying multinational groups need to evaluate the effective tax rate according to the requirements of the Pillar Two regime.

In other words, an entity incorporated in the UAE Free Zone, being a member of the multinational group with €750 million revenue threshold, can also be considered under the DMTT rules despite its 0% tax rate.

Businesses should therefore consider:

• Whether the parent group meets the revenue test for being global.
• Whether the UAE entity is a component entity under the GloBE regulations.
• Whether the entity meets any exclusion conditions.
• The influence of its tax incentives on the effective tax rate under GloBE.
• Whether there will be additional taxes under the UAE DMTT.

Free Zone status alone should not be treated as protection from the global minimum tax.

Which Companies Are Exempt from the Domestic Minimum Top-up Tax?

All enterprises and organizations are not subject to the UAE Domestic Minimum Top-Up Tax.

In general, the regime does not apply to enterprises that fall below the qualifying multinational group revenues.

Some enterprises are expressly excluded from the scope of the GloBE regime, which include:

1. Public sector organizations.
2. International organizations.
3. Non-governmental organizations.
4. Pension funds.
5. Certain investment vehicles and real estate investment vehicles which meet the criteria of Ultimate Parent Entities.

These exclusions are subject to specific conditions under the legislation.

Also, the rules include a de minimis exception that may permit the top-up tax in respect of a jurisdiction to be considered as being zero where the necessary income and revenue criteria are met.

Thus, it is advisable for organizations to look at the qualifying criteria rather than assume automatic exemption of their business.

What Are the UAE Global Minimum Tax Rules for Businesses?

UAE’s Global Minimum Tax Rules are inspired by the OECD’s Pillar Two Approach. It aims at creating a collective system to ensure that large multinational enterprises pay minimum taxes of 15%.

The framework includes several important considerations:

• Revenue test for global income: The threshold of revenue of €750 million needs to be satisfied in at least two out of the four preceding financial years.
• Effective tax rate computation: Effective tax rate shall be computed on a jurisdiction-by-jurisdiction basis.
• Required effective tax rate: The required effective tax rate is 15%.
• Top-up tax: Top-up tax may be payable if the effective tax rate is less than the required effective tax rate.
• Alignment with international standards: OECD GloBE Model Rules shall be applied.

Ministerial Decision No. 88 of 2025 of UAE adopted the OECD guidelines and comments on the global minimum tax rules, which is helpful for implementing its DMTT framework.

What Should Multinational Companies Do to Prepare for DMTT Compliance?

Businesses which might be subject to the UAE DMTT need to start assessing their group structures and tax reporting procedures.

It might be hard to wait until the tax reporting period, especially if the group is organized via different subsidiaries.

Below are some actions companies need to undertake.

1. Review the Group Revenue Threshold

Check the consolidated financial statements of the ultimate parent entity in the four preceding financial years to the relevant financial year.

Ascertain if the group satisfies the €750 million criterion for at least two of those years.

2. Identify UAE Constituent Entities

Make a list of all entities and permanent establishments located in UAE which could be covered by the GloBE rules.

Check out the ownership structure of such entities if any.

3. Review the Effective Tax Rate

Determine the UAE effective tax rate of the group using the GloBE approach.

Avoid relying on only the normal 9% corporate tax rate or the tax rate in each firm’s account.

4. Assess Tax Incentives

Evaluate the various tax incentives, Free Zone advantages, and any other tax changes for their effect on the Group’s GloBE tax situation.

5. Maintain Accurate Financial Records

Maintain accounting and tax records and computations and ensure they are well-documented.

In some cases, firms will have to gather data from different subsidiaries for use in computing their DMTT figures.

6. Seek Professional Tax Guidance

Calculations under Pillar Two entail complex accountancy and tax computations.

Collaborating with competent tax specialists could assist multinational corporations in determining any possible liability issues and compliance needs.

When Did the UAE Domestic Minimum Top-up Tax Become Effective?

The UAE Domestic Minimum Top-up Tax applies to financial years beginning on or after 1 January 2025.

It was introduced through Cabinet Decision No. 142 of 2024, which provides the detailed framework for imposing top-up tax on qualifying multinational enterprises.

The UAE Ministry of Finance has further promulgated Ministerial Decision No. 88 of 2025 in this respect, based on related OECD guidance and commentary.

It is recommended that businesses familiarize themselves with the rules applicable to their fiscal year.

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Conclusion

The adoption of Domestic Minimum Top-up Tax in UAE is a significant move in terms of how corporations pay taxes within the country. Through the application of Pillar Two of the OECD rules, the UAE intends to ensure that any multinational enterprise group pays a minimum effective tax rate of 15%.

Nevertheless, not all business concerns are eligible for such a framework. Applicability of the framework depends on various aspects, among them being the consolidated group revenue, entity classification, equity, and the effective tax rate calculated under the GloBE rules.

Companies need to be aware of their tax statuses and the reporting procedures as far as tax payment is concerned.

In essence, being aware of the UAE Domestic Minimum Top-up Tax in advance will help businesses understand their tax liabilities and keep accurate records.

Need assistance with UAE corporate tax compliance? E-Startup provides business and corporate tax-related support to help companies understand their regulatory obligations and manage their business requirements in the UAE. Contact E-Startup to discuss your business requirements and get professional guidance.

Frequently Asked Questions (FAQs)

1. What is the Domestic Minimum Top-up Tax in UAE?

Domestic Minimum Top-up Tax for UAE is a 15% domestic minimum tax regime that applies to multinational enterprises that meet certain criteria. The objective is to make sure that the operations of these companies in UAE meet the minimum effective tax rate requirement.

2. Which companies are required to pay the 15% DMTT in UAE?

The criteria usually include UAE subsidiaries that are part of multinational groups having an aggregate annual turnover of at least €750 million in any two of the four previous financial years. The additional tax can also be levied on them if their UAE tax rate is below 15%.

3. Are small businesses in the UAE affected by the Domestic Minimum Top-up Tax?

Normally, no. Small businesses which are independent and those which do not belong to the multinational enterprises are not included in the DMTT even if they are individually profitable.

4. Does the UAE Domestic Minimum Top-up Tax apply to Free Zone companies?

Certainly, qualifying Free Zone entities that belong to multinational enterprises within the application of Pillar Two are impacted. A 0% Free Zone corporate tax benefit does not necessarily mean that such an entity is automatically exempted from DMTT.