Domestic Minimum Top-Up Tax in the UAE | What Multinational Groups Need to Prepare For?

The DMTT rules UAE bring the global minimum tax idea into local law. Large multinational groups that use the UAE as a hub will soon face a 15 percent minimum effective tax rate on UAE profits.

This is not only another tax. It changes how accounting teams look at entity structures, incentives and data quality across their UAE footprint. This guide breaks down how these rules work and how finance teams can get ready.

How DMTT Fits Into UAE New Tax Rules?

The UAE new tax rules started with Federal Decree-Law No. 47 of 2022, which set a 9 percent corporate tax rate for most business profits.

After that, the UAE joined the OECD Pillar Two project that aims to push large multinationals toward a 15 percent effective tax rate in every country where they book profit.

To protect its own tax base, the UAE chose a domestic minimum top-up tax instead of relying only on other countries to collect under Pillar Two. The DMTT tops up UAE tax where the effective rate inside the country sits below 15 percent for in-scope groups.

Who Falls in the Scope of DMTT?

The core DMTT threshold follows the OECD model.

• Groups need consolidated global revenue of at least EUR 750 million in two of the last four financial years.
• Only UAE entities that sit inside such groups count as “Constituent Entities” for local DMTT purposes.
• The regime applies for financial years starting on or after 1 January 2025.

Cabinet Decision No. 142 of 2024 gives detailed definitions of covered entities, effective tax rate calculations and safe harbours that align with the OECD Global Anti-Base Erosion (GloBE) rules. For many MNEs, this will be the first time UAE operations need Pillar Two style calculations, even if local corporate tax exposure looked low in the past.

UAE Domestic Minimum Top Up Tax Explained in Simple Terms

At a high level, the UAE domestic minimum top up tax explained looks like this:

• Calculate GloBE-style income for all in-scope UAE entities on a jurisdictional basis.
• Work out covered taxes linked to that income using accounting data adjusted under Cabinet Decision rules.
• Derive the effective tax rate by dividing covered taxes by GloBE income.
• If the result is below 15 percent, apply a top-up so the final rate reaches that level.

A qualifying domestic minimum top-up tax (QDMTT) like this counts as part of the Pillar Two system, so other countries should give credit for the UAE top-up when they apply their own global minimum taxes.

How DMTT Links to UAE Pillar 2 Rules

The UAE wants the DMTT to be “qualified” under OECD standards so it fits cleanly inside wider UAE Pillar 2 rules. That means:

• The tax must follow GloBE concepts for income, covered taxes and substance-based carve-outs.
• The outcome should match what a foreign income inclusion rule or undertaxed profits rule would have collected on the same profits.

If the regime passes that test, groups reduce the risk that another country still charges its own top-up on UAE profits, which would create double layers of minimum tax.

Key Pressure Points for Multinational Groups

DMTT will not only touch tax returns. It will reach deep into data flows, reporting tools and transfer pricing models. Early reviews across the market highlight some common pressure points.

Data quality and granularity

Pillar Two style calculations need country-level data on taxes, deferred taxes and permanent adjustments. Many ERP and consolidation tools do not yet provide clean jurisdictional splits.

Entity mapping and scoping

Groups must map which UAE entities are in scope, which enjoy free zone incentives, which book exempt income and how each links into the global consolidation. Mixing these up can shift effective tax rates by several points.

Interaction with incentives

Legacy tax holidays or free zone regimes may still cut normal UAE corporate tax. DMTT then claws back part of that benefit if the effective rate drops below 15 percent.

Intercompany pricing and location of profit

Transfer pricing that once made sense at 0 or 9 percent may lead to concentrated DMTT exposure in the UAE once the minimum rate kicks in.

Practical Steps to Prepare for DMTT Rules UAE

Groups do not need to wait for the first DMTT year to start. There is plenty they can do now.

1. Run dry-run calculations

Use recent UAE numbers to run test GloBE calculations. That shows which entities or lines of business create low effective tax rates and how big any top-up might be.

2. Build a clean data pipeline

Work with finance, tax and IT teams so accounting systems can tag UAE income, covered taxes and adjustments in a way that feeds Pillar Two tools. Patch-work spreadsheets will not cope once reporting cycles start.

3. Revisit entity structures and incentives

Review free zone structures, intermediate holding companies and local incentive claims under the new lens. Some structures may still work, others may only create compliance costs without real net tax savings.

4. Update governance and reporting

Boards and audit committees need clear dashboards on DMTT risk, including early warnings where effective rates drift below the 15 percent level. Internal controls should cover scoping, data integrity and sign-off chains.

How Arnifi Helps Groups Prepare for DMTT

The DMTT regime closes a long chapter in which UAE tax planning focused mainly on headline rates and simple exemptions. Large groups now need a more technical, data-heavy approach that ties UAE numbers into global minimum tax models.

Arnifi works with multinational groups that use the UAE as a regional hub. Our team helps map in-scope entities, test effective tax rates under the new rules and build data pipelines that feed Pillar Two engines without manual struggle. 

With our expert accounting and bookkeeping services, we review incentive claims, free zone positions and transfer pricing so boards see how the DMTT interacts with UAE new tax rules they already follow.

With that support, finance leaders can walk into the first DMTT cycle with a clear playbook, not a last-minute scramble.

FAQs

Q1. Which groups need to care about the UAE Domestic Minimum Top-Up Tax?

Groups with consolidated global revenue above EUR 750 million in at least two recent years and UAE entities inside the group will need to model DMTT exposure and reporting duties.

Q2. When will the DMTT start to apply in the UAE?

The regime applies to financial years that start on or after 1 January 2025, so many calendar-year groups will first face DMTT exposure in the financial year that begins during 2025.

Q3. How is the 15 percent minimum rate tested under DMTT?

Tax teams calculate GloBE-style income and covered taxes for all in-scope UAE entities together. Decision rules then derive a jurisdictional effective tax rate that must reach 15 percent after any top-up.

Q4. Do free zone incentives still matter once DMTT begins?

Free zone regimes can still cut base UAE corporate tax. Where the resulting effective tax rate drops below 15 percent, DMTT may claw back part of that benefit through a top-up charge.

Q5. When should an MNE involve advisers such as Arnifi on DMTT?

Once it is clear the group meets the revenue threshold and has UAE operations, it makes sense to start dry-run calculations and design data flows with advisers so the first DMTT year runs smoothly.