Is Your Organization Subject to DMTT in the UAE?

On 11 February 2025, the UAE Ministry of Finance (MoF) issued Cabinet Decision No. 142 of 2024, introducing a Domestic Minimum Top-Up Tax (DMTT) on Multinational Enterprises (MNEs). This measure implements a domestic top-up tax regime aligned with the OECD Pillar Two Model Rules.

As a result, certain MNE groups may be required to pay DMTT at a rate of 15% on their UAE income.

What is DMTT?

The DMTT functions similarly to Corporate Tax (CT), ensuring that MNEs operating in the UAE are subject to a minimum level of taxation on their profits. It is designed to secure a minimum Effective Tax Rate (ETR) in line with the OECD Pillar Two Model Rules, thereby preventing profit shifting and ensuring consistent baseline taxation.

Applicability of DMTT

The DMTT applies to Constituent Entities (CEs) and Joint Ventures (JVs) of MNE groups operating in the UAE whose consolidated annual turnover is at least EUR 750 million in two or more of the last four fiscal years.

The regime is effective for financial years commencing on or after 1 January 2025.

UAE-based MNE groups — including Exempt Persons or Qualifying Free Zone Persons (QFZPs) under the UAE Corporate Tax Law — should assess whether they fall within the scope of the DMTT.

Entities Excluded from DMTT

• Governmental entities
• International organizations
• Non-profit organizations
• Pension funds
• Investment funds that are Ultimate Parent Entities (UPEs)
• Real estate investment vehicles that are UPEs

Key Features of the UAE DMTT

• Effective Tax Rate (ETR): A minimum ETR of 15% applies, imposing a top-up tax for low-tax UAE CEs within in-scope MNE groups.
• Interaction with UAE CT Regime: The DMTT operates as a supplementary tax to UAE Corporate Tax and applies only to MNE groups meeting the EUR 750 million revenue threshold.
• Income Inclusion Rule (IIR): The UAE has opted not to implement the IIR. Instead, the DMTT protects the UAE tax base by preventing foreign jurisdictions from levying top-up tax on UAE-sourced profits.
• Undertaxed Profits Rule (UTPR): The UTPR has not yet been implemented under the current Cabinet Decision.

Compliance Requirements

• Registration: In-scope entities must register with the Federal Tax Authority (FTA). Further guidance will be issued regarding timelines and procedures.
• DMTT Returns: To be filed within 15 months following the end of the relevant financial year, or within 18 months for the first reporting year.
• DMTT Payment: Any top-up tax due must be paid by the same deadline as the return filing.
• Pillar Two Information Return: Expected to align with the standard GloBE Information Return format, subject to further MoF guidance.

Relief Available under DMTT

Transitional Country-by-Country Reporting Safe Harbors (TCSH):

• De Minimis Threshold: UAE revenue below EUR 10 million and profit (loss) below EUR 1 million
• Simplified ETR Test: UAE ETR meets transition rate (16% for FY 2025, 17% for FY 2026)
• Routine Profits Test: UAE profits do not exceed substance-based income exclusion

This relief applies to financial years commencing before 1 January 2027 and not ending after 1 July 2028.

Initial Phase of International Activity Relief

• MNE operates in no more than six jurisdictions
• Net book value of tangible assets (excluding highest value jurisdiction) does not exceed EUR 50 million
• UAE CE is not held by a parent entity applying a Qualified IIR

This relief may apply for up to five years, subject to continued compliance.

Conclusion

The introduction of DMTT represents a major development in the UAE’s international tax framework. In-scope MNEs should proactively assess applicability, compliance requirements, and available reliefs to ensure readiness.

Our team at FAAB Partners shall be happy to provide any clarification with respect to the above. Please feel free to contact us for further assistance.

Regards,
FAAB PARTNERS