OECD Pillar Two in the UAE.

For global information on OECD Pillar Two and the global minimum tax for multinational groups in all markets, see Acclime Group’s guide.

The United Arab Emirates (UAE) has enacted a Domestic Minimum Top-up Tax (DMTT) through Cabinet Decision No. 142 of 2024, aligning with the OECD’s Pillar Two Global Anti-Base Erosion (GloBE) Rules and introducing a 15% minimum effective tax rate for large multinational enterprise (MNE) groups operating in the UAE. The DMTT applies for fiscal years beginning on or after 1 January 2025.

Unlike most implementing jurisdictions, the UAE has adopted only the DMTT. It has not introduced the Income Inclusion Rule (IIR) or the Undertaxed Profits Rule (UTPR), and the DMTT has obtained OECD Transitional Qualified Status. This guide focuses on the UAE’s implementation, filing obligations and local considerations.

At a glance

Local summary

The UAE collects top-up tax on low-taxed UAE profits through the DMTT, ensuring a minimum effective tax rate (ETR) of 15% for in-scope groups. UAE corporate tax (currently 9%) is calculated as usual, and the DMTT then imposes an additional UAE tax where the GloBE ETR on UAE profits is below 15%. Because the DMTT has Transitional Qualified Status, other jurisdictions are not required to compute a separate top-up tax on UAE profits under their IIR or UTPR, so the UAE retains the top-up tax on its own profits.

Scope and key concepts

The DMTT applies to MNE groups meeting the EUR 750 million consolidated revenue threshold. In the UAE, it applies to constituent entities located in the country, both mainland and free zone, where the global group meets the threshold. UAE-headquartered groups with no operations outside the UAE are outside scope, and certain entities are excluded, including governmental entities, investment entities, pension funds, non-profit organisations and qualifying investment funds.

Because the UAE applies only a DMTT, the top-up tax on low-taxed UAE profits is collected domestically rather than by a foreign parent under an IIR or UTPR. The DMTT is computed on the GloBE income base, which starts from the accounting standard used in the Ultimate Parent Entity’s consolidated financial statements and is then subject to GloBE adjustments. This differs from the IFRS base used for UAE corporate tax, so the DMTT and corporate tax are computed on different income bases.

Local deviations

The UAE’s principal departure from the OECD norm is structural: it has implemented only the DMTT, to collect top-up tax on low-taxed UAE constituent entities, and has not adopted the IIR or UTPR. The Ministry of Finance has indicated it will keep this position under review. The UAE DMTT is otherwise designed to preserve its OECD qualified safe-harbour status, with only limited variations from the GloBE Model Rules, and it adopts a proportional treatment of payroll and tangible assets that are split across jurisdictions for the purpose of the Substance-Based Income Exclusion.

Compliance and filing obligations

In-scope groups with UAE constituent entities have registration and reporting obligations with the Federal Tax Authority (FTA). A single UAE entity may be appointed as the Domestic Designated Filing Entity to register, file and pay on behalf of all UAE constituent entities.

Key deadlines

The reporting obligations

Registration and the Domestic Designated Filing Entity

Any entity in scope of the DMTT registers with the FTA in the prescribed form and timeline. A single UAE entity may be appointed as the Domestic Designated Filing Entity to register, file and pay on behalf of all UAE constituent entities. An entity that ceases to be in scope files a deregistration application with the FTA.

Pillar Two Information Return (GIR)

The Pillar Two Information Return is the standardised OECD-format GloBE Information Return, filed with the FTA using the template adopted under Ministerial Decision No. 88 of 2025, which is based on the OECD GloBE Information Return of January 2025.

Top-up Tax Return (QDMTT Return)

The Top-up Tax Return is filed with the FTA by the Domestic Designated Filing Entity on behalf of the UAE constituent entities, reporting and assessing the UAE DMTT liability. Both the GIR and the Top-up Tax Return are due 18 months after the end of the first transitional fiscal year, and 15 months after the end of each subsequent fiscal year.

Transitional safe harbours and reliefs

The Cabinet Decision adopts the OECD safe harbours, including the Transitional CbCR Safe Harbour (for fiscal years beginning before 1 January 2027 and not ending after 30 June 2028) and the permanent Simplified Calculations Safe Harbour (the underlying tests are explained in the Group guide). A relief for the initial phase of international activity also applies, broadly excluding the DMTT for up to five fiscal years where the group operates in no more than six jurisdictions and holds no more than EUR 50 million of tangible assets outside its reference jurisdiction, provided no parent entity is subject to a Qualified IIR elsewhere.

Tax incentive impact

The UAE’s headline corporate tax rate is 9%, and qualifying free zone income is taxed at 0%, both of which sit below the 15% minimum. For in-scope groups, the DMTT can therefore apply to UAE profits even where corporate tax has been correctly paid, and it overrides free zone benefits when computing the jurisdictional ETR, because the OECD rules do not recognise free zone incentives for this purpose. A Qualifying Free Zone Person that is part of an in-scope group may consequently face a top-up to 15% notwithstanding its 0% corporate tax treatment.

Two newer incentives interact with the DMTT. The R&D tax incentive (Ministerial Decision No. 24 of 2026) provides a non-refundable credit of up to 50% of eligible expenditure, capped at AED 5 million. Where the UAE ETR is below 15%, part of the benefit may be recovered through the DMTT, although the related staff costs also support the Substance-Based Income Exclusion. The high-value employment incentive, a refundable credit effective from 1 January 2025, is treated as a Non-Qualified Refundable Tax Credit under the GloBE Rules, reducing covered taxes and potentially pushing the ETR below 15%. A route may exist for the R&D credit to be treated as a Qualified Tax Incentive under the OECD Substance-based Tax Incentives Safe Harbour, but only if the UAE formally adopts that safe harbour.

Monitoring, audit and disputes

The FTA administers the DMTT, covering registration, the Pillar Two Information Return, the Top-up Tax Return and payment. The DMTT operates as an additional layer on top of UAE corporate tax and is computed on a different income base, so groups should reconcile their GloBE and corporate tax positions and retain supporting records. Groups may use the FTA’s clarification and dispute mechanisms in relation to assessments or collection actions.

Key local issues

The penalties and the transitional relief are the main compliance points to note. The following penalties apply in respect of each of the GIR and the Top-up Tax Return:

A transitional relief also applies: no penalties are imposed in respect of filing the Top-up Tax Return or the GIR for fiscal periods beginning on or before 31 December 2026 (and not ending after 30 June 2028), provided the group has taken reasonable measures to apply the DMTT correctly. This relief does not extend to the late payment of actual top-up tax liabilities.

Local contact

For advice on how Pillar Two applies to your group’s UAE operations, please contact Acclime UAE about our tax services regarding OECD Pillar Two.