UAE Implements 15% Multinational Corporate Tax to Achieve Global Tax Fairness The United Arab Emirates has announced the introduction of a supplementary local corporate tax rate of 15% on the profits of large multinational companies, effective January 1, 2025. This measure aims to align with international tax standards and ensure that companies pay their fair share of taxes in the countries where they operate, regardless of the location of their headquarters.

Objectives of the New Tax:

This tax is part of the OECD’s “Pillar Two” project and seeks to: Combat Tax Evasion: By addressing practices where companies shift profits to low-tax jurisdictions. Ensure Tax Fairness: By ensuring that local and international businesses pay the same tax rate, creating a level playing field. Boost Government Revenues: To fund developmental projects and infrastructure improvements.

Significance of the Tax in the UAE:

As a global economic hub hosting numerous multinational corporations, the UAE’s adoption of this tax is a strategic move to enhance economic competitiveness and safeguard its financial reputation. It also supports sustainable development through the allocation of tax revenues to strategic projects.

Details of the New Framework:

The tax will apply to companies generating consolidated global revenues of €750 million or more during at least two of the four financial years preceding the tax year.

The Ministry of Finance confirmed that the framework aligns with the OECD’s model rules and will release further details in due course.

Tax Incentives to Foster Innovation:

In parallel with the new tax policy, the UAE is considering additional incentives, including: Research and Development (R&D) Incentives: Set to take effect on January 1, 2026, offering tax credits ranging from 30% to 50% of eligible expenditures to encourage innovation. High-Value Employment Incentives: Launching alongside the 15% tax in 2025, this initiative aims to attract talent that provides significant economic contributions.

Expected Impacts:

The new tax framework is anticipated to yield multiple benefits, including: Increased government revenues. Enhanced transparency and fairness in the tax system. Attraction of new investments and support for sustainable economic growth. While it may affect the competitiveness of smaller businesses and lead to higher operational costs, the Ministry believes the long-term advantages outweigh these challenges.

 

Conclusion: The implementation of a 15% multinational corporate tax marks a pivotal step in the UAE’s journey toward a more sustainable and inclusive economy. By adopting these policies, the UAE reaffirms its commitment to global standards while fostering a competitive economic environment that strengthens its position as a global business hub.