UAE to Introduce 15% Minimum Tax for Large Multinationals

For years, tax rules in Dubai focused on low headline rates and targeted incentives. Large groups could route major profit through UAE entities with little extra tax cost as long as they met local rules. However, now that picture is changing.

The UAE will now apply a 15 percent domestic minimum top-up tax on large multinational groups, in line with the OECD Pillar Two framework. Boards that still treat the UAE as a simple low-tax hub need a new map.

Current UAE Corporate Tax Baseline

The federal corporate tax law sets a two-step rate. Taxable income up to AED 375,000 sits at 0 percent. Any taxable income above that level is charged at 9 percent.

Those rates apply to most resident companies and to non-residents with a permanent establishment in the country. Free zone entities are taxable persons too, but qualifying free zone firms can keep 0 percent on defined “qualifying income” and 9 percent on the rest, as long as they meet substance and other tests set in decisions and guides.

These basics stay in place. The new rules sit on top and affect how much tax large multinational groups finally pay on their UAE profit. That is where the new Dubai multinational tax rules matter.

Why is a 15 Percent Minimum Tax Implemented?

More than 130 countries agreed to the OECD / G20 Pillar Two project. The idea is simple. Very large groups should pay at least 15 percent effective tax in each jurisdiction where they earn profit.

To align with this framework, the UAE issued Cabinet Decision No. 142 of 2024 on a Domestic Minimum Top-up Tax, often shortened to DMTT. The decision applies to “Constituent Entities” of in-scope groups and sets out how to calculate effective tax rate, GloBE income and top-up amounts.

The policy goal is clear. The country wants to stay an attractive base for investment but also protect its tax base as other states implement their own minimum tax rules. If the UAE did nothing, foreign rules could capture part of the low-tax UAE profit instead.

These UAE corporate tax changes mean tax teams must now think about jurisdiction-level effective tax rate, not only domestic rules.

Who Falls in Scope of the New Regime?

The DMTT targets only large multinational groups. The key test is consolidated global revenue of at least EUR 750 million in at least two of the last four financial years.

When a group meets that size test, each UAE “Constituent Entity” can face top-up tax if the calculated effective tax rate on its GloBE income sits below 15 percent. The calculation looks at covered taxes and adjusted profit for all UAE entities together, not company by company.

The regime applies for financial years starting on or after 1 January 2025. That timing gives groups some runway, but not much, to test models and systems. This is why tax rules in Dubai for multinationals now need to be strictly followed.

How the 15 Percent Minimum Works in Practice?

Under Cabinet Decision No. 142 and related guidance, the process for UAE groups broadly follows the OECD GloBE rules.

At a high level, the steps are:

• Work out GloBE income for all in-scope UAE entities using financial accounts, adjusted under specific rules.
• Identify covered taxes, including UAE corporate tax and certain foreign taxes allocated to UAE entities.
• Compute the jurisdictional effective tax rate by dividing covered taxes by GloBE income.
• If the rate is below 15 percent, calculate a top-up percentage and apply it to the GloBE income to find the top-up tax.

The DMTT then charges that extra amount inside the UAE instead of leaving the gap open for foreign Income Inclusion Rules or Undertaxed Profits Rules.

In effect, the UAE 15 percent minimum tax does not replace the standard 9 percent system. It adds a second layer that only activates when large groups pay too little tax in the UAE on a Pillar Two view.

Impact on Incentives, Free Zones and Substance

Traditional planning relied on low or zero rates in certain zones or activities. Under a 15 percent floor, those benefits can shrink on a group level if the effective rate falls below the minimum.

Free zone packages that once gave long periods at 0 percent still help with cash flow, but DMTT may claw back part of that benefit through top-up tax. Groups that push high margins into a single low-tax entity now risk extra tax instead of savings.

Real substance now matters more. Payroll, tangible assets and genuine decision making in the UAE can support safe use of incentives and reduce exposure to foreign Pillar Two rules.

For boards, the key shift is mindset. Incentives still exist, but they must sit on top of commercial structures that make sense in a 15 percent world.

What large groups should review first

For multinational groups that use Dubai as a hub, three early reviews sit at the top of the list:

• Entity map and data quality. Confirm that legal entity lists, trial balances and tax registrations match. Pillar Two work needs clean ledgers, accurate ownership charts and consistent currency handling.
• Jurisdictional effective tax model. Build a simple tool that blends all UAE entities and shows the projected effective tax rate under GloBE rules, not only under domestic rules.
• Interaction with other countries. Check where foreign Pillar Two rules will apply and how credits for UAE DMTT and corporate tax will work in those calculations.

Once those basics are in place, groups can look at more refined changes to financing, IP location or supply chains.

How Will It Impact Large Groups in the UAE?

For large groups that rely on Dubai as a regional base, the global minimum tax is not only a compliance project. It touches deal pricing, internal funding and even how much time senior leaders spend in the UAE.

Boards now need clear dashboards that show UAE effective tax rate, DMTT exposure and interactions with other countries. That visibility lets them judge if old structures still serve their purpose or if new, substance-driven models will give better long term results.

Handled in a planned way, the 15 percent taxation does not remove Dubai’s role. It simply means the advantages now lie in stable rules, deep treaty networks and real regional operations instead of very low recorded tax.

Conclusion

FAQs

Does the 15 percent minimum tax apply to every company in Dubai

No. The DMTT targets only multinational groups with at least EUR 750 million consolidated revenue in two of the last four years. Smaller UAE businesses stay under normal corporate tax rules only.

How does the new minimum interact with the 9 percent UAE corporate tax rate

Companies still compute UAE corporate tax as usual at 0 percent then 9 percent. For in-scope groups, the DMTT adds top-up tax if the jurisdictional effective rate on GloBE income sits below 15 percent.

Are free zone incentives now useless for multinationals

Not useless, but different. Free zone rates still help with cash timing and legal certainty. However, when the blended effective tax rate falls below 15 percent, top-up tax can reclaim part of that benefit at group level.

When do large groups need to start applying the new Dubai multinational tax rules

The DMTT applies for financial years that begin on or after 1 January 2025. Groups with calendar years need live models for the 2025 year and should start collecting data during 2024 close.

What is the main risk if boards delay preparation for the UAE 15 percent minimum tax

The main risk is inconsistent data that leads to wrong effective tax rate numbers. That can cause double taxation when foreign Pillar Two rules apply or trigger disputes over how top-up tax was calculated.