Does the 15% Minimum Top-Up Tax (Pillar Two) Apply to My Business?

Executive Summary

The 15% Domestic Minimum Top-Up Tax (DMTT) under Pillar Two applies only to Multinational Enterprise (MNE) Groups with consolidated annual revenues of EUR 750 million or more in at least two of the four preceding fiscal years. If your business falls below this threshold or operates solely within the UAE without foreign constituent entities, the top-up tax does not apply to you.

Legal Basis

• Federal Decree-Law No. 47 of 2022, Article 3 (as amended by Federal Decree-Law No. 60 of 2023)
• Cabinet Decision No. 142 of 2024 on the Imposition of Top-up Tax on Multinational Enterprises
• Ministerial Decision No. 88 of 2025 on Commentary and Agreed Administrative Guidance for Pillar Two

Analysis

The UAE has implemented a Domestic Minimum Top-Up Tax aligned with the OECD's Global Anti-Base Erosion (GloBE) Model Rules. This ensures that large MNE Groups pay a minimum effective tax rate of 15% on profits arising in the UAE, regardless of other tax incentives or exemptions they may benefit from.

The top-up tax operates as a separate levy from the standard 9% Corporate Tax rate. Key characteristics include:

• It applies at the level of constituent entities within an MNE Group
• The tax "tops up" the effective tax rate to 15% where it falls below this threshold
• It is calculated using GloBE Income and specific covered tax rules

> ⚠️ Important: The top-up tax applies to Financial Years starting on or after 1 January 2025 [Cabinet Decision No. 142 of 2024, Article 9].

Key Requirements

Revenue Threshold:

• Consolidated group revenue of EUR 750 million or more


• Threshold must be met in at least two of the four fiscal years immediately preceding the tested fiscal year


• Revenue determined under the Ultimate Parent Entity's consolidated financial statements

Excluded Entities:

• Government Entities


• International Organisations


• Non-profit Organisations


• Pension Funds


• Investment Funds that are Ultimate Parent Entities


• Real Estate Investment Vehicles that are Ultimate Parent Entities

Qualifying Criteria for Application:

• The MNE Group must have at least one constituent entity or permanent establishment located outside the jurisdiction of the Ultimate Parent Entity


• Purely domestic groups are excluded from scope

Dependencies

The top-up tax interacts with other Corporate Tax provisions:

• Qualifying Free Zone Person (QFZP) benefits at 0% may trigger top-up tax liability if the effective rate falls below 15%
• Small Business Relief and other exemptions do not shield MNE Groups from Pillar Two obligations
• Transfer pricing adjustments may affect GloBE Income calculations

Critical Considerations

Registration and Compliance:

• MNE Groups in scope must register with the Federal Tax Authority


• A GloBE Information Return must be filed within 15 months of the fiscal year end (18 months for the first applicable year)


• Transitional safe harbours may apply for initial periods [Ministerial Decision No. 88 of 2025]

Practical Assessment:

• Review your group's consolidated financial statements for the EUR 750 million threshold


• Determine whether your group has foreign constituent entities


• If in scope, assess effective tax rates across all UAE entities

> 💡 Note: If your business is a standalone UAE entity or part of a group below the revenue threshold, standard Corporate Tax rules at 9% (or 0% for QFZPs) apply without Pillar Two implications.