The UAE Ministry of Finance has unveiled important updates to the Federal Decree-Law No. 47 of 2022, which focuses on the taxation of corporations and businesses. These updates include the introduction of the Domestic Minimum Top-up Tax (DMTT) and several proposed tax incentives aimed at boosting growth, innovation, and the UAE’s competitiveness on the global stage.

Domestic Minimum Top-up Tax (DMTT)

Starting from January 1, 2025, the UAE will implement the Domestic Minimum Top-up Tax (DMTT), as part of Federal Decree Law No. 60 of 2023. This measure aligns the country’s tax system with the Organisation for Economic Co-operation and Development (OECD) standards, specifically the Two-Pillar Solution, which aims to ensure a minimum effective tax rate of 15% for multinational enterprises (MNEs).

The DMTT will apply to MNEs that have consolidated global revenues of €750 million or more in at least two of the last four financial years. This new tax measure reflects the UAE’s commitment to maintaining a fair and transparent tax system, in line with global standards, while enhancing the country's economic stability.

Proposed Tax Incentives to Fuel Growth and Innovation

In addition to the DMTT, the UAE Ministry of Finance has also proposed two key tax incentives aimed at fostering innovation and driving economic growth:

1. R&D Tax Incentive
   Set to take effect on January 1, 2026, this incentive will provide a 30-50% refundable tax credit to businesses investing in research and development activities within the UAE. This initiative is aligned with OECD guidelines and is designed to encourage innovation by offering businesses financial support for R&D efforts. The goal is to position the UAE as a hub for innovation and technological advancement.

2. High-Value Employment Tax Credit
   Proposed for January 1, 2025, this incentive offers a refundable tax credit for businesses that employ senior executives and high-value professionals who contribute significantly to the UAE’s economy. This includes roles such as C-suite executives and other senior-level positions. The tax credit will be based on the eligible salary costs for these key employees, providing businesses with an incentive to attract top talent to the country.

Enhancing Competitiveness and Attracting Sustainable Investment

These new tax measures are part of the UAE's broader strategy to enhance its global competitiveness, attract sustainable investment, and foster innovation across key sectors. By introducing a transparent, efficient tax system, the UAE aims to provide businesses with the support and incentives needed to grow and thrive in an increasingly competitive global economy.

The implementation of these measures is subject to legislative approval, with further guidance expected in the coming months. These updates underscore the UAE’s commitment to creating a robust, business-friendly environment that aligns with international tax standards and supports the country’s long-term strategic goals.

As these tax incentives and the DMTT come into effect, the UAE is poised to strengthen its position as a global business hub, encouraging investment, innovation, and economic growth in the years ahead.