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On 6th February, the Ministry of Finance of the UAE published Cabinet Decision No. (142) of 2024, establishing the DMTT framework.
The Cabinet Decision took effect on 1 January 2025 and applies to Fiscal Years beginning on or after 1 January 2025.
The DMTT applies to multinational enterprises (MNEs) operating in the UAE that generate annual global revenues of at least €750 million in the Consolidated Financial Statements of the Ultimate Parent Entity (UPE) for at least two of the four financial years preceding the tax period. It ensures that a minimum effective tax rate (ETR) of 15% is met in the UAE, with the top-up tax imposed when an MNE’s ETR falls below this threshold.
The UAE DMTT follows the GloBE Model Rules, including Administrative Guidance and Commentary issued by the OECD. However, there are a few differences that should be taken into account, e.g.:
The DMTT provisions do not yet provide for the Income Inclusion Rule (IIR) and the Undertaxed Payment Rule (UTPR);
IFRS are considered as the primary standard for calculating tax obligations;
Sovereign investment funds are not considered Ultimate Parent Entities (UPEs).
To ensure clarity on the DMTT framework, the UAE Ministry of Finance has released a set of Frequently Asked Questions (FAQs), addressing key compliance aspects, calculations, and reporting requirements under the DMTT framework.
The FAQs address key concerns, including the UAE’s decision not to implement the Income Inclusion Rule (IIR), the rationale behind certain deviations from the OECD’s GloBE rules, and financial accounting standards applicable under the DMTT. It also advises businesses to rely only on official sources for accurate information and to address the FTA via clarification requests.
The Ministry also confirmed that further guidance will be published by the Federal Tax Authority in due course.
EmaraTax Portal has introduced a new option for Family Foundations to apply for "transparent status" (similar to the Unincorporated Partnership) for Corporate Tax purposes. Upon approval, these foundations will be treated as tax-transparent entities, meaning they will not be subject to corporate tax themselves. Instead, beneficiaries will be taxed as if they directly owned the foundation’s assets and managed investments.
Applications can now be submitted on the EmaraTax portal under Corporate Tax > Corporate Tax > Other Applications.
As part of the application, Family Foundations applying for Tax Transparency status must:
Select a Tax Period: choice of “Previous,” “Current,” or “Subsequent” tax periods for the exemption to apply.
Input Beneficiary/ies Details: full information for all individual beneficiaries must be provided. If a Public Benefit Entity is a beneficiary, its founding documents must be uploaded.
Provide Financial Information: Full financial statements or Asset Ledger.
The FTA portal currently lacks a separate category for applying for an extension of the "Unincorporated Partnership" status for underlying entities held by Family Foundations. It is assumed that the application process applies to all entities eligible for "Unincorporated Partnership" status and can be submitted from their respective accounts.
As the FTA has not provided a specific timeline for reviewing applications, potential delays may occur.
The EmaraTax portal has introduced the corporate tax declaration form for the year 2024. The form covers the tax period from January 1, 2024, to December 31, 2024.
Taxpayers are required to submit their declarations by the deadline of September 30, 2025.
On February 11, 2025, the Russian government published Order No. 280-r regarding the signing of a new Double Taxation Agreement (DTA) with the UAE, along with the draft of the agreement.
The project was officially signed on February 12, 2025.
Key provisions of the new DTA include:
The new DTA is expected to come into effect on January 1, 2026.
In a significant move to tackle tax evasion and boost compliance, the FTA has ramped up its inspection efforts in 2024. The FTA conducted a staggering 93,000 field visits across the seven emirates, marking a remarkable 135% increase from the 40,000 visits made in 2023.
The intensified control campaigns have yielded impressive results, including the seizure and confiscation of 11 million packages of non-compliant tobacco products that were found without the required 'digital tax stamps.' In addition, the FTA’s inspections led to the confiscation of over 3.9 million packages of excise goods such as soft drinks, energy drinks, and sweetened beverages, which were also in violation of tax regulations.
The FTA published Decision No. 2 of 2025, effective from 1 March 2025, which updated policy regarding the issuance of clarifications and directives, introducing key changes to enhance the tax administration process.
The Decision mainly reiterates the provisions regarding the issue of the private clarifications, including reasons for rejection, and sets out the procedure for the issue of public clarifications.
With respect to the directives, the FTA clarifies the question of issuing directives through administrative exception decisions, input tax apportionment decisions, and advance pricing agreements:
This policy aims to provide clear guidelines for taxpayers and ensure consistent application of tax laws through formal clarifications and directives.
FTA published Decision No. 1 of 2025, effective from 1 March 2025, which outlines specific cases in which the deadlines for submitting requests for the review of tax assessments or reconsiderations can be extended.
Under the new guidelines, taxpayers may request an extension of the deadline for submitting a tax assessment review request or a request for reconsideration in the following situations: the occurrence of an accident or a serious illness for the authorised signatory, the death of the authorised signatory, a temporary business disruption that is beyond the person’s control, a damage of records due to a disaster, a force majeure, etc.
Taxpayers seeking an extension must clearly demonstrate their reasons for not meeting the original deadline and provide supporting documentation where applicable. The FTA will evaluate each case individually and grant extensions based on the merits of the request.
The UAE Supreme Court has recently issued two significant rulings that enhance the rights of taxpayers in disputes with the Federal Tax Authority, offering greater protection and expanding the ability to challenge FTA decisions.
In Case No. 212/2023, the Supreme Court reinforced taxpayer rights by clarifying that if the FTA exclusively holds the evidence needed to resolve a tax dispute, the burden of proof may shift to the FTA.
Furthermore, if a taxpayer contests a tax assessment or penalty and the FTA fails to provide supporting documents, the court may assume the taxpayer's position is correct.
The ruling also stipulated that the FTA is now prohibited from withholding critical evidence, with such actions potentially working against the FTA in court.
Taxpayers are encouraged to clearly indicate which documents the FTA possesses and their significance in disputes. If the FTA fails to respond or provide evidence, the court may side with the taxpayer.
Additionally, the UAE Supreme Court issued a ruling on January 8, 2025, in Case No. 1322/2024, confirming that taxpayers have the right to challenge FTA decisions even during the enforcement stage. This ruling clarified that, if substantial objections to the merits of the FTA decision exist, taxpayers may present objections during the execution phase. The Court deemed FTA decisions as administrative acts, not judicial rulings, allowing taxpayers to dispute the legitimacy of the debt even after enforcement has commenced.
These rulings set important precedents, further strengthening taxpayer protection in the UAE by ensuring they have more avenues to challenge FTA decisions, both during the assessment process and at the enforcement stage.
Read more on the case No. 212/2023 and No. 1322/2024
The law establishes a 20% corporate tax for companies involved in both extractive activities (such as oil and gas production) and non-extractive natural resources, based on the taxable base for each company.
For extractive companies, the taxable base is determined by the total share of the company in the value of produced oil and gas, with tax calculations following agreements made with the Oil Department. The tax due will be paid to the Oil Department according to these agreements.
Non-extractive companies will calculate their taxable base from their net taxable profits, with provisions for asset depreciation and tax loss deductions.
The law also specifies penalties for late payments, audit procedures, and an appeals process. Companies failing to meet their tax obligations may face penalties of 1% for every 30 days of delay.
The UAE Federal Tax Authority (FTA) is hosting important webinars in March 2025, aimed at providing valuable insights into corporate tax regulations and compliance:
1) Corporate Tax Webinar - Natural Persons Under The Corporate Tax Law / Real Estate Investments for Natural Persons
Date: 11th March 2025
Time: 10:00 am to 01:00 pm (English)
2) Corporate Tax Return Webinar
Date: 12th March 2025
Time: 10:00 am to 01:00 pm (English)
Both webinars are open to all stakeholders seeking to better understand the UAE’s corporate tax system. Participants can register by clicking on the provided links for each session.
On January 16, the National Bureau of Revenue (NBR) released a detailed guide “Entities in Scope Of DMMT” regarding the application of the Digital Minimum Tax Tax (DMTT), specifically addressing which entities are subject to the tax and the application of the profit test, including exceptions and "safe harbors."
The purpose of these clarifications is to provide practical guidance on the scope of DMTT, offering examples to help organizations understand which entities are included and which are excluded. Additionally, the document explains how to apply exceptions and "safe harbor" provisions, which can reduce the tax liabilities of qualifying organizations to zero.
These clarifications aim to ensure that businesses and tax professionals can effectively navigate the complexities of the DMTT regulations.
In early February 2025, the Saudi Arabian Tax and Customs Authority (ZATCA) released new guidelines on Advance Pricing Agreements (APAs), offering businesses greater clarity on transfer pricing methods for controlled transactions.
APAs are agreements that outline the transfer pricing methods and their application to specific tax periods, usually spanning three years, with the possibility of extension. These agreements aim to provide certainty on how tax authorities will assess controlled transactions.
The process for applying for an APA is as follows:
These new guidelines are expected to help businesses navigate transfer pricing regulations more effectively and ensure consistent and predictable tax assessments.
On 6 February 2024, the Ministry of Finance of the UAE published Cabinet Decision No. (142) of 2024, introducing the Domestic Minimum Top-up Tax (DMTT) framework. This new regulation took effect on 1 January 2025 and applies to Fiscal Years beginning on or after 1 January 2025.
All UAE taxpayers, including Exempt Persons and Qualifying Free Zone Persons under the UAE Corporate Tax Law, must determine if they fall within the scope of the DMTT. If they are within scope, they are required to comply with the provisions of the DMTT provisions. This includes calculating and paying any top-up tax owed, as well as submitting the necessary filings and notifications, when applicable.
While the DMTT framework applies fiscal years from 2025 onwards with the first reporting taking place within 18 months after the end of the reporting fiscal year, early preparation for DMTT impact is crucial for several reasons:
Business Structuring: it may no longer be necessary to chase a 0% Corporate Tax rate
Many businesses in UAE Free Zones are currently aiming to benefit from a 0% Corporate Tax rate, which may now be subject to top-up tax under DMTT. If an entity is ultimately taxed at 15%, businesses should re-evaluate their corporate structure to determine whether Free Zone incentives remain advantageous.
This is a complex and time-consuming analysis in which the taxpayer should:
Preparing early allows businesses to strategically plan their tax positions, leverage transitional provisions, and explore potential safe harbors. By acting already in 2025, taxpayers can avoid last-minute compliance challenges and better position themselves for DMTT’s rules application.
New Compliance Obligations: DMTT introduces additional compliance requirements, making it essential to prepare early
Businesses must determine their DMTT status, procced with the registration, ensure accurate tax calculations, and file required documentation (e.g. Pillar 2 Information Return) in line with UAE regulations. Failure to comply could lead to penalties and increased scrutiny.
0% Tax Rate May Still Be Beneficial: Understanding SBIE is important
The Substance-Based Income Exclusion (SBIE) can reduce the tax base subject to the top-up tax, potentially allowing some businesses to retain tax advantages. Properly assessing SBIE eligibility now will help businesses optimize their tax position and avoid unnecessary costs.
Our team is ready to assist you in determining whether your UAE structures may fall under the DMTT scope, including identifying identify UAE structures that could be impacted by the new regulations, calculating the effective tax rate of Constituent entities, evaluating safe harbors and transitional provisions to leverage potential benefits, assessing the applicability of SBIE and other exclusions.
We also provide expert advisory support to keep you informed on Pillar 2 implementation in the UAE and offer valuable insights into uncertain matters of DMTT.
E-mail: mena@pgplaw.ru
