UAE: Legislation implementing Pillar Two global minimum tax rules

Effective for financial years beginning on or after January 1, 2025

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February 12, 2025

Cabinet Decision No. (142) of 2024 implementing the Pillar Two global minimum tax rules was published in the official gazette.

Effective for financial years beginning on or after January 1, 2025, multinational enterprises (MNEs) with an annual turnover of €750 million or more in two out of the four preceding fiscal years will be subject to the domestic minimum top-up tax (DMTT), imposing a minimum effective tax rate of 15%.

The legislation aligns with the OECD global anti-base erosion (GloBE) model rules and OECD guidance. Entities liable for the top-up tax include constituent entities, joint ventures, permanent establishments, and minority owned constituent entities. Exclusions apply to government and investment entities.

Clarifications have been provided on the calculation of Pillar Two liability, including income or loss computation, quantification of adjusted covered taxes, and the application of transitional country-by-country (CbC) reporting safe harbors and simplified calculations safe harbor.

Compliance obligations require in-scope entities and domestic designated filing entities to register with the Federal Tax Authority (FTA) before the yet-to-be-determined deadline and submit the top-up tax return and pay the Pillar Two liability within 15 months after the financial year or 18 months after the transitional year.

Read a February 2025 report prepared by the KPMG member firm in the UAE

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