UAE Ministry of Finance Announces Key Updates to Taxation Provisions

UAE Ministry of Finance Announces Key Updates to Taxation Provisions

UAE Ministry of Finance Announces Key Updates to Taxation Provisions

UAE Ministry of Finance Announces Key Updates to Taxation Provisions, Including New Domestic Minimum Top-Up Tax and Tax Incentives for Innovation. 

The UAE Ministry of Finance has unveiled important updates to the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. These amendments introduce a Domestic Minimum Top-Up Tax (DMTT) and new tax incentives aimed at promoting growth and innovation. 

Introduction of Domestic Minimum Top-Up Tax (DMTT): As part of the UAE’s ongoing commitment to the Organisation for Economic Co-operation and Development’s (OECD) Two-Pillar Solution, a Domestic Minimum Top-Up Tax will be effective from 1st January 2025 for financial years starting on or after that date. This tax is designed to ensure that large multinational enterprises (MNEs) meet a minimum effective tax rate of 15% on profits in every jurisdiction where they operate. 

The DMTT will apply to MNEs with consolidated global revenues of €750 million or more in at least two out of the previous four financial years. This step aligns with the OECD’s GloBE Model Rules. Further details on the legislation will be provided by the Ministry of Finance. 

Tax Incentives to Support Growth and Innovation: To foster a business-friendly environment and support national strategic goals, the Ministry of Finance is considering several new tax incentives. Among them is a Research and Development (R&D) Tax Incentive, aimed at promoting innovation and economic growth. 

Expected to take effect in tax periods beginning 1st January 2026, the R&D incentive will provide businesses with a tax credit of 30-50%, potentially refundable based on revenue and employee count. 

Additionally, a refundable tax credit for high-value employment activities is under consideration. This incentive, effective from 1st January 2025, will encourage businesses to hire senior personnel involved in core functions that add significant value to the UAE economy. 

The final details and approval of these incentives will be provided in due course. The Ministry of Finance will issue further guidance on their implementation. 

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