The UAE has introduced a set of tax incentives for multinational companies (MNCs) operating in the country, reinforcing its position as a leading global investment hub. The move, effective January 1, 2025, provides key tax relief measures for eligible subsidiaries, particularly in investment activities.
Key Tax Incentives for Multinationals
- 0% Domestic Top-Up Tax for Eligible MNCs
- MNCs that meet the ‘de minimis exclusion criteria’ will not be subject to a domestic top-up tax.
- Typically, businesses in UAE free zones enjoy a 0% tax rate if their non-qualifying income is below 5% of total revenue or Dh5 million, whichever is lower.
- Investment Activities Exempt from 15% Minimum Tax
- Investment entities will be excluded from the domestic minimum top-up tax (DMTT) of 15%.
- This aims to attract more investment and support the UAE’s economic diversification efforts.
Understanding the 15% Corporate Tax for Multinationals
The UAE’s 15% corporate tax rate for MNCs aligns with OECD’s Pillar 2 rules, which ensure that large enterprises pay a minimum effective tax rate in every country they operate in.
- Applies to multinational groups with global revenues of €750 million or more (approx. Dh3 billion).
- The tax is based on the GloBE Model Rules, ensuring compliance with global tax standards.
Additional Tax Relief Measures
- Substance-Based Income Exclusion: Reduces the taxable base for MNCs based on payroll costs and tangible assets, lowering their effective tax burden.
- Tax Credit for High-Value Jobs:
- Companies that engage in high-value employment activities—such as executive leadership, innovation, and R&D—can claim a refundable tax credit.
- This measure is aimed at attracting top-tier talent and stimulating economic growth.
- No Tax on Initial Expansion Phase:
- New multinational entities expanding into the UAE will not face the 15% minimum tax in their initial operational phase.
- This transitional relief ensures a business-friendly tax environment.
UAE’s Competitive Tax Strategy
With global tax reforms impacting large corporations, the UAE is strategically balancing compliance with international standards while offering incentives to attract foreign investment.
By reducing tax burdens on investment activities and high-value employment, the UAE reinforces its position as a preferred destination for multinational business expansion. If you’re wondering whether your company qualifies for these incentives, get in touch with the Haris Consultancy team for a tailored consultation.
