The UAE has unveiled a set of tax incentives for multinational companies (MNCs) operating within the country. These measures, effective from January 1, 2025, are designed to encourage investment activities and strengthen the UAE’s position as a global business hub.

MNC entities in the UAE will be subject to a corporate tax rate of 15%, as opposed to the 9% rate applicable to other businesses. However, as part of the incentives, subsidiaries of these companies can benefit from a 0% domestic top-up tax, provided they meet the “de minimis exclusion criteria.” This threshold applies when non-qualifying income remains below 5% of total revenue or Dh5 million, whichever is lower.

Additionally, the Ministry of Finance has announced that investment entities will be excluded from the 15% domestic minimum top-up tax. This move aims to attract more investments and enhance the UAE’s competitiveness. The Ministry emphasized that these measures are aligned with the global ‘Pillar 2’ tax framework, which requires large MNCs to pay a minimum effective tax rate of 15% in every country they operate.

Experts in the UAE have welcomed these incentives, citing the potential for increased economic activity as more multinational companies set up or expand their operations in the region.

The UAE’s domestic minimum top-up tax applies to entities within MNCs with global revenues of €750 million or more in at least two out of the last four financial years. The rules also include provisions like substance-based income exclusions, which reduce taxable income based on factors such as payroll and tangible assets.

The Ministry of Finance has further introduced a refundable tax credit to encourage high-value employment activities, especially for executives and senior personnel performing core business functions. These benefits aim to boost innovation and contribute significantly to the UAE’s economy.

Transitional measures have also been put in place to exempt new international activities from the domestic top-up tax during their initial phase. This is intended to create a supportive tax environment that fosters growth and investment.

These comprehensive tax measures highlight the UAE’s commitment to maintaining its status as a leading investment destination.