The United Arab Emirates (UAE) will implement a 15% minimum top-up tax on large multinational companies starting January, the Ministry of Finance announced on Monday. This move is part of the OECD’s global minimum corporate tax agreement, signed by 136 countries, including the UAE, aimed at ensuring major corporations pay a minimum tax rate of 15% and curbing tax avoidance. As a result, there will be new challenges as well as opportunities for businesses to operate in the UAE. The tax reformation is a significant step in boosting the UAE’s non-oil revenues while aligning its tax policies with global standards.
What is the new corporate tax for companies in the UAE?
For Small Companies
Companies with a yearly income of less than AED 375,000 are exempt from corporate tax in UAE.
For Medium & Large Companies
Companies earning more than AED 375,000 per year will be taxed at a rate of 9%.
Additional Important Rule
The new taxation rules will only apply if businesses in UAE have a yearly turnover of over AED 1 million.
| Type of Business | Tax Rate |
| Small and Medium-Sized Enterprises (SMEs) with taxable income below AED 375,000 | 0% |
| Large domestic companies and multinational enterprises | 9% |
| Large multinational enterprises with global revenues exceeding €750 million | Minimum effective tax rate of 15% |
When will the new corporate taxes in UAE apply?
- The standard corporate tax of 9% in the UAE went into effect on June 1, 2023.
- The additional 15% minimum tax for large multinational companies will start from January 1, 2025.
Important announcements regarding Tax Incentives in UAE
In addition to the new corporate tax, the UAE government is implementing several tax incentives. These are as follows:
1. Research and Development (R&D) Tax Incentive:
- To encourage R&D activities within the UAE, the UAE government is planning to offer a potential tax credit of 30-50% on eligible R&D expenses.
- R&D activities must align with OECD standards and be conducted within the UAE to be eligible for this tax incentive.
- The R&D tax incentive is expected to take effect from January 1, 2026.
2. High-Value Employment Tax Credit
- To attract and retain highly skilled talent in the UAE, a refundable tax credit on salaries paid to high-value employees is under planning. For example, if you pay C-suite executives and other key personnel, you can get refundable tax credit
- The high-value employment tax credit is expected to take effect from January 1, 2025.
Conclusion
- Firstly, UAE introduces a 9% corporate tax for companies earning over AED 375,000 annually.
- Secondly, starting January 2025, Large multinational corporations will face a minimum 15% tax.
- The UAE is considering offering tax incentives for R&D to boost innovation.
- Furthermore, they are also planning tax credits for high-value employment to attract talent.
Moreover, If you want any other guidance relating to UAE corporate tax, UAE golden visa, or UAE company registration, please feel free to talk to our business advisors at 8881-069-069.
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