UAE Ministry of Finance Outlines New Filing Obligations for Multinational Top-Up Tax

The UAE's ministry of finance has issued a new decision detailing the filing obligations for top-up tax concerning multinationals. The domestic minimum top-up tax (DMTT) applies to multinational enterprises that possess a consolidated global revenue of €750 million ($793 million) or more in at least two out of the four financial years immediately preceding the applicable financial year, having been in effect since January 1 last year.

This latest decision clearly specifies which entities must file a Pillar Two information return with the Federal Tax Authority. Included are constituent entities—excluding any investment entity located in the UAE, as well as joint ventures and JV subsidiaries in the Emirates. The regulation also applies to any “stateless constituent entity that is a reverse hybrid entity created in accordance with the laws of the UAE”. A reverse hybrid entity is treated as tax transparent in its own territory, yet remains opaque in the territory of an owner. Meanwhile, a stateless entity refers to an organization whose income is exempt from tax in the primary company's home country while lacking an independent tax home.

The DMTT aligns directly with the Organisation for Economic Co-operation and Development's two-pillar reform programme, established to implement a global minimum corporate tax guaranteeing that large multinational enterprises pay a minimum of 15 per cent tax on profits across every country where they operate. According to the OECD, this initiative aims to tackle tax challenges driven by the digitalisation and globalisation of the economy while placing a floor on tax competition.

Previously, the UAE introduced a federal corporate tax featuring a standard statutory rate of 9 per cent starting from the financial year beginning on or after June 1, 2023, bringing company incomes exceeding Dh375,000 into the taxable bracket, whereas taxable profits below that threshold are subjected to a zero per cent tax. Furthermore, the UAE’s DMTT qualifies for the OECD Pillar 2 safe harbour, successfully minimizing administrative burdens for both MNEs and the tax administration by eliminating the need to perform top-up calculations in other jurisdictions.

The ministry emphasized that the latest ministerial decision “forms part of the UAE’s continued implementation of the Pillar Two requirements and reaffirms the country’s commitment to enhancing international tax transparency, while providing greater tax certainty and clarity for multinational enterprises regarding their reporting obligations”. Entities are permitted to fulfill these requirements by filing either directly or through a designated local entity.