UAE’s New 15 % Global Minimum Tax: Essential Guide for Multinationals
Big change is coming in 2025.
The UAE will apply a 15% top-up tax on large multinational companies, and this isn’t just a tax update.
It’s a global move.
And it’s called Pillar Two under the OECD plan.
Why does this matter to you?
Because the UAE’s global minimum tax is changing how the country deals with big business. And even if you run a small or growing company, you’ll want to stay informed. This new rule targets global giants earning over €750 million.
But the shift could shape the way taxes work across the region. If you plan to grow, raise funding, or join a group, this could affect you.
Let’s look at it in detail.
What Is Pillar Two?
Pillar Two UAE is part of a global tax plan introduced by the OECD. It aims to stop large multinational companies from using tax loopholes and shifting profits to low-tax countries.
The main idea is simple: all big businesses should pay at least 15% in taxes, no matter where they operate.
If they don’t pay the 15% tax, they will have to pay the difference elsewhere. That’s called a top-up tax.
This rule targets large groups with global revenue above €750 million. It’s designed to ensure fair taxation and to level the playing field across different countries.
In May 2024, the UAE decided to align with this global effort. It issued Cabinet Decision No. 142 of 2024, officially adopting Pillar Two UAE through what’s called the Domestic Minimum Top-up Tax.
The new rule will take effect from 1 January 2025. It applies only to the largest multinational groups operating in the UAE.
If you’re a small or growing business, this may not affect you yet. But it’s a sign of what’s coming. The UAE, known for its tax-friendly system, is now moving with the rest of the world on global tax reform.
Who Is Affected?
This new 15% top-up tax doesn’t apply to everyone.
It’s only for big multinational groups earning €750 million in consolidated revenue in any two of the past four years, showing steady, large-scale operations, not just a one-off success.
It doesn’t matter if the company is based in the UAE or abroad. What matters is that they have operations in the UAE.
This includes UAE subsidiaries, joint ventures, and even reverse hybrid entities. If they’re part of a larger group that meets the threshold, they fall under the new tax.
Some groups are completely excluded. Governments, non-profit organizations, and pension or investment funds do not fall under this rule. They’re considered out of scope.
So if you’re running a small company or just starting out, you’re safe—for now. But if you’re planning to scale or be acquired by a big group, this could matter soon.
Mechanics of the Tax
This new tax isn’t a flat fee; it’s based on how much tax a big company already pays. If a company pays less than 15% in the UAE, it will now have to pay the top-up tax.
Top-Up Tax & ETR Calculation
To see if a company owes this top-up, the government checks the company’s Effective Tax Rate (ETR) in the UAE.
The formula is simple:
ETR = Adjusted Covered Taxes ÷ Pillar Two Income
If the ETR is below 15%, the company pays the difference.
Pillar Two: Income & Covered Taxes
These two numbers, Covered Taxes and Pillar Two Income, come from a company’s financial reports. But they aren’t used as it is. They’re adjusted using special rules.
The adjustments include things like
- Intra-group transactions,
- tax credits,
- other tax details.
These adjustments help paint a more accurate picture of the company’s real tax situation.
What are Reliefs & Transitional Provisions?
The following relief and transitional provisions are offered:
Substance-Based Carve-Outs
If your company has real business activities in the UAE—like hiring people or owning buildings and equipment—you won’t have to pay the new tax on all your profits. Some of your income will be left out of the tax calculation based on:
- How much do you spend on employee salaries
- The value of physical assets you own in the UAE (like offices, factories, or equipment)
This setup is designed to benefit businesses that actually operate in the country, rather than those just shifting profits to reduce taxes.
Safe Harbours (2025–2027)
Think of this like a temporary cushion.
If your UAE-based entity is considered low-risk, meaning you already report financial info country-by-country (CBCR), and your numbers look clean, you might not need to pay the top-up tax immediately.
This safe period lasts from 2025 to 2027.
Key Dates & Filing Obligations
The UAE’s new 15% minimum tax applies to any company whose financial year starts on or after January 1, 2025. So if your fiscal year begins in 2025, you’ll need to follow the new rules.
Top-Up Tax Return
Once the year ends, big companies need to file a Top-Up Tax Return. This tells the tax authority if you owe extra tax to meet the 15% minimum rate.
You’ll have 15 months to submit this after the end of your financial year. But for the first year, they’re giving 18 months as a one-time flexibility.
Pillar Two Information Return
There’s another form too—called the Pillar Two Information Return. This gives a full breakdown of the group’s global profits, taxes paid, and how your effective tax rate was worked out.
It needs to follow a standard OECD format, and in the UAE, it will be filed through the Federal Tax Authority (FTA) platform.
Strategic Actions for MNEs
If you’re a big business (making over €750 million), here’s what you should start doing:
- Make a list of all your companies.
This means checking how many businesses are in your group and where they are. You need this to see if the new tax will apply to you. - Check how much tax you’re paying in each country.
If it’s less than 15%, you might need to pay more. This extra is called a “top-up tax.” - Use the tax reliefs, if you can.
The UAE is allowing some relief based on things like how many employees you have and your real assets. - Get your system ready.
You’ll have to report more information now. So your finance and accounting team needs to prepare for new rules and forms. - Stay updated.
The UAE’s tax authority (FTA) might announce more rules or benefits, like tax discounts for R&D or hiring skilled people.
Broader Implications
This move is part of a bigger plan. Countries all over the world are trying to stop big companies from dodging taxes. The 15% rule makes things fairer.
The UAE used to be known for very low taxes. But now, with a 9% corporate tax already in place, and this new top-up tax, it’s slowly shifting. Still, it wants to stay attractive to businesses.
That’s why businesses need to act now. Don’t wait. The rules are changing fast. If you’re ready early, you avoid trouble later.
It’s better to be ahead than to catch up when it’s too late.
Conclusion
The 15% global minimum tax is not just a headline anymore; it’s happening. Starting January 2025, large multinational groups in the UAE will need to step up. This means understanding where you stand, what counts as income, and how much tax you’re actually paying.
Don’t wait for a notice to show up. Start by mapping out your group structure. Check your revenues and run your Effective Tax Rate. See if you qualify. If you do, get ready to file the right forms—on time and in the correct format.
These new rules aren’t simple. There are carve-outs, safe harbors, exceptions, and lots of fine print. It’s easy to miss something. That’s why it’s smart to bring in someone who knows the game. A good tax advisor can help you stay ahead, avoid penalties, and maybe even find savings within the rules.
The clock is ticking. Better to plan now than panic later.
FAQs:
If a multinational group doesn’t comply with the new 15% minimum tax rule, it risks heavy penalties and back taxes. The Federal Tax Authority (FTA) can demand the missing “top-up” tax along with fines for late or incorrect filings. It could also hurt the company’s reputation and lead to tougher audits.
The UAE’s 15% minimum tax is in line with what many countries are introducing under the OECD’s global tax plan. However, the UAE still keeps its 9% corporate tax for most regular businesses. The 15% only hits large multinationals with €750 million+ in revenue. So, while the rate is similar to others, the UAE still offers a friendly tax setup for smaller or growing businesses.
For small and mid-sized businesses, not much will change. The 9% corporate tax still applies, and there are no big shifts in local rules. But for large multinational groups, the game is changing. They’ll now pay a minimum 15%, no matter how tax-friendly the UAE is. Still, the UAE remains attractive due to its strategic location, business infrastructure, and supportive policies—just not as much of a tax haven for the very big players.
To calculate ETR, companies divide their adjusted covered taxes by Pillar Two income. It’s not based on regular tax filings, but on financial statements with specific adjustments. These include things like deferred taxes, group-level tax credits, and certain exclusions. If the ETR comes out below 15%, the company pays a top-up tax.
Industries with large multinational footprints—like tech, oil and gas, logistics, pharmaceuticals, and finance—are most likely to be affected. These sectors often have complex international structures and big earnings. If they’ve been paying less than 15% tax globally, they’ll now face the top-up tax. Smaller local businesses in retail, services, or manufacturing won’t feel the impact—unless they’re part of a big global group.
Yes, the UAE has included some reliefs. There are “substance-based carve-outs” for payroll and tangible assets, which can lower the taxable base. There are also temporary “safe harbor” rules for 2025–2027 to help low-risk companies avoid extra tax. Plus, smaller entities under €10 million revenue or €1 million profit may be excluded.
Companies doing R&D or hiring high-value employees might also get incentives later, depending on FTA updates.
References
- Cabinet Decision No. 142 of 2024 on the Imposition of Top-up Tax on Multinational Enterprises. https://mof.gov.ae/wp-content/uploads/2025/02/English-Cabinet-Decision-142-of-2024-on-Top-up-Tax-on-MNEs-1.pdf.
- Economic Impact Assessment of The Global Minimum Tax. https://www.oecd.org/content/dam/oecd/en/topics/policy-issues/cross-border-and-international-tax/summary-economic-impact-assessment-global-minimum-tax-january-2024.pdf.
- Global Anti-Base Erosion Model Rules (Pillar Two). https://www.oecd.org/en/topics/sub-issues/global-minimum-tax/global-anti-base-erosion-model-rules-pillar-two.html.
- Ministry of Finance Announces Amendments to Corporate Tax Law. https://www.wam.ae/en/article/b6lsvgy-ministry-finance-announces-amendments-corporate.
- ‘Tax Challenges Arising from the Digitalisation of the Economy – GloBE Information Return (January 2025)’. OECD, 15 Jan. 2025, https://www.oecd.org/en/publications/tax-challenges-arising-from-the-digitalisation-of-the-economy-globe-information-return-january-2025_a05ec99a-en.html.
- The Imposition of Top-up Tax on Multinational Enterprises. https://tax.gov.ae/Datafolder/Files/Legislation/Cabinet-Decision-No-142-of-2024-on-Top-up-Tax-on-MNEs.pdf.
- ‘UAE Domestic Minimum Top-up Tax’. Ministry of Finance – United Arab Emirates, https://mof.gov.ae/uae-domestic-minimum-top-up-tax/.
