UAE Domestic Minimum Top-Up Tax: Pillar Two Rules for Multinationals

For financial years starting on or after 1 January 2025, certain multinational enterprise groups operating in the country can fall under the UAE domestic minimum top-up tax, commonly called UAE DMTT.

The rule comes from the OECD's Pillar Two global minimum tax framework. Its basic goal is to ensure that large multinational groups pay an effective tax rate of at least 15% on relevant profits in each jurisdiction where they operate.

This does not mean every UAE company now pays 15% corporate tax. The rules target multinational groups that cross a specific global revenue threshold, and the actual calculation includes several adjustments, exclusions and safe harbours.

If your group operates in several countries, has UAE subsidiaries or earns income through a UAE free zone, it is worth checking the rules before the first filing deadline arrives.

For general UAE tax rules, you can also read Nexture's UAE Corporate Tax Guide.

What Is the UAE Domestic Minimum Top-Up Tax?

The UAE domestic minimum top-up tax is the country's implementation of a domestic minimum tax under the OECD Pillar Two Global Anti-Base Erosion rules, usually called the GloBE Rules.

The UAE introduced the regime through Cabinet Decision No. 142 of 2024. According to the UAE Ministry of Finance Top-up Tax guidance, the rules apply to qualifying constituent entities of multinational groups operating in the UAE where the group's annual global revenue reaches €750 million or more in at least two of the four financial years immediately preceding the relevant financial year.

The UAE DMTT became effective for financial years beginning on or after 1 January 2025.

At a simple level, the system checks the multinational group's effective tax rate on its UAE profits. Where the Pillar Two effective tax rate falls below the 15% minimum, a top-up tax may become payable.

The calculation is more detailed than simply subtracting the UAE's normal 9% corporate tax rate from 15%.

Who Is Subject to UAE DMTT?

The starting point is the multinational group's consolidated revenue. An MNE group will generally enter the scope of the UAE DMTT where:

• it has entities or operations in more than one jurisdiction

• it has one or more constituent entities in the UAE

• the ultimate parent entity prepares consolidated financial statements

• consolidated group revenue is at least €750 million in two of the previous four financial years

Smaller businesses are therefore outside the main scope of Pillar Two.

A UAE company with AED 30 million, AED 100 million or even AED 1 billion in turnover does not automatically become subject to DMTT. You have to look at the consolidated worldwide revenue of the multinational group to which the company belongs.

The €750 million threshold is broadly consistent with the scope used under the OECD's global minimum tax framework. 

How Does the 15% Minimum Tax Work?

Pillar Two looks at an MNE group's effective tax rate, or ETR, within a jurisdiction.

In simplified form: Effective Tax Rate = Adjusted Covered Taxes ÷ Net Pillar Two Income

If the UAE ETR is 15% or more, there will normally be no percentage shortfall to top up. If the ETR is below 15%, the difference becomes the starting top-up tax percentage.

For example, suppose an in-scope multinational group has:

• UAE Pillar Two income: AED 100 million

• Adjusted covered taxes: AED 10 million

• UAE ETR: 10%

The initial top-up percentage would be: 15% - 10% = 5%

You would not simply charge 5% on the entire AED 100 million. The UAE rules can reduce the amount exposed to top-up tax through the Substance-Based Income Exclusion and other adjustments.

UAE DMTT Is Calculated on a Jurisdictional Basis

One point often causes confusion. Pillar Two generally does not test every ordinary UAE subsidiary in isolation. Relevant income and covered taxes of UAE constituent entities are brought together under the jurisdictional calculation, subject to the detailed treatment of entities such as joint ventures and certain minority-owned entities.

Consider a multinational with two UAE companies.

Company A has a relatively high effective tax rate. Company B benefits from a lower effective rate. You cannot necessarily conclude that Company B owes top-up tax simply because its individual rate is below 15%. The UAE jurisdictional calculation has to be completed under the Pillar Two rules.

This makes group structure and financial reporting especially important.

Multinational groups with several UAE companies should also distinguish DMTT treatment from ordinary UAE corporate tax grouping. Nexture's guide to corporate tax grouping in the UAE explains how the normal corporate tax grouping regime works.

Substance-Based Income Exclusion

The Substance-Based Income Exclusion, or SBIE, can reduce the profit exposed to UAE DMTT.

It recognises payroll and tangible assets connected with real economic activity in the UAE.

For fiscal years beginning in 2025, the transitional rates are:

The transitional percentages gradually fall until the long-term rate reaches 5% for eligible payroll and 5% for eligible tangible assets. The UAE Ministry of Finance confirms that the exclusion reduces net Pillar Two income when determining excess profit subject to the DMTT.

Simple example

Assume an MNE group has:

• AED 100 million of UAE Pillar Two income

• AED 20 million of eligible payroll

• AED 50 million of eligible tangible assets

• a 10% effective tax rate

Using the 2025 percentages:

Payroll exclusion:

AED 20 million × 9.6% = AED 1.92 million

Tangible asset exclusion:

AED 50 million × 7.6% = AED 3.8 million

Total SBIE:

AED 5.72 million

Excess profit:

AED 100 million - AED 5.72 million = AED 94.28 million

Top-up percentage:

15% - 10% = 5%

A simplified top-up calculation would therefore start at approximately:

AED 94.28 million × 5% = AED 4.714 million

Actual calculations can differ because the GloBE rules contain further adjustments.

What About UAE Free Zone Companies?

This is particularly important for large multinational groups using UAE free zones.

Under the regular UAE corporate tax regime, a Qualifying Free Zone Person may receive a 0% corporate tax rate on qualifying income, provided the relevant conditions are met. The FTA provides separate guidance on the free zone corporate tax regime.

For an MNE group inside the Pillar Two scope, however, a 0% corporate tax rate does not mean the income can automatically remain at a 0% effective rate for global minimum tax purposes.

Pillar Two uses its own calculation of income and covered taxes. That means a large multinational with a qualifying free zone company may need to examine whether UAE DMTT applies to its UAE profits after taking account of jurisdictional blending, SBIE, safe harbours and other adjustments.

De Minimis Exclusion

The UAE rules also contain a de minimis exclusion. At the election of the filing constituent entity, UAE top-up tax can be treated as zero for a fiscal year where both relevant conditions are satisfied:

• average Pillar Two revenue in the UAE is below €10 million

• average Pillar Two income is a loss or below €1 million

The averages generally cover the current fiscal year and the two preceding fiscal years.

Both conditions must be satisfied. The election is made annually.

This exclusion can be useful where a very large global group has only a limited operation in the UAE.

Investment Entities and Other Special Cases

Certain entities receive specific treatment under the UAE DMTT framework. The Ministry of Finance states that entities meeting the definition of an Investment Entity are not subject to UAE DMTT under the domestic rules.

There is also transitional relief for MNE groups in the initial phase of their international activity, provided the required conditions are met, including the condition relating to ownership by a parent subject to a Qualified Income Inclusion Rule.

These rules are technical. Groups involving funds, investment vehicles, joint ventures, minority ownership or complex holding structures should classify each entity before starting the tax calculation.

UAE DMTT Safe Harbour Status

An important development came in August 2025 when the UAE Ministry of Finance announced that the UAE DMTT had been added to the OECD's central record with transitional qualified status.

The UAE also received QDMTT Safe Harbour status.

In practical terms, this supports recognition of the UAE's domestic top-up tax within the international Pillar Two framework.

The OECD Central Record for Global Minimum Tax legislation tracks jurisdictions whose domestic minimum tax, Income Inclusion Rule and related measures have received qualified status.

The UAE has continued updating its framework as the OECD issues further Pillar Two guidance. Ministerial Decision No. 96 of 2026 appears within the Ministry of Finance's current tax legislation records, while the OECD also released further Global Minimum Tax administrative guidance during 2026.

UAE DMTT Registration and Filing Requirements

Being subject to DMTT creates a separate compliance workload. FTA Decision No. 12 of 2026 introduced registration and deregistration timelines for Top-up Tax. The decision is listed on the FTA Corporate Tax legislation portal.

The general registration framework requires an entity subject to Top-up Tax to register within seven months from the end of its first in-scope fiscal year, with transitional rules applying to earlier periods.

There are also separate return requirements.

Under Cabinet Decision No. 142 of 2024, the Top-up Tax Return is generally due no later than 15 months after the end of the reporting fiscal year. For an entity's first transition year, the deadline extends to 18 months after the end of that reporting fiscal year.

In August 2026, Ministerial Decision No. 133 of 2026 also clarified which entities must file the Pillar Two Information Return. These include relevant UAE constituent entities, UAE joint ventures and JV subsidiaries, subject to the detailed rules. A Designated Local Entity may file on behalf of qualifying entities.

Records Multinationals Should Prepare

If your group falls within the €750 million threshold, DMTT preparation should start well before filing.

You may need data covering:

• group consolidated revenue

• ownership structure

• constituent entity classification

• UAE Pillar Two income or loss

• covered taxes

• deferred tax adjustments

• payroll information

• tangible asset carrying values

• intercompany transactions

• tax credits and incentives

• permanent differences

• joint ventures

• prior-year Pillar Two calculations

• safe harbour eligibility

• elections made under the GloBE framework

The Pillar Two Information Return also requires information about constituent entities, group structure, jurisdictional ETR calculations, top-up taxes and relevant elections.

Common UAE DMTT Mistakes to Avoid

One common error is assuming the regular 9% UAE corporate tax rate automatically determines the Pillar Two result. It does not. GloBE income and covered taxes follow separate rules.

Another is assuming a free zone company's 0% rate removes the need for Pillar Two analysis. For an in-scope MNE, that low tax rate can make the DMTT calculation more relevant.

Groups should also avoid checking the €750 million threshold using the revenue of the UAE entity alone. The test focuses on the consolidated revenue of the multinational group.

Finally, do not leave payroll, fixed-asset and deferred-tax data collection until the return deadline. These figures can directly affect the jurisdictional ETR and top-up calculation.

Conclusion

The UAE domestic minimum top-up tax marks a major change for large multinational groups operating in the country. The regime applies from financial years beginning on or after 1 January 2025 and generally targets MNE groups with consolidated annual revenue of at least €750 million in two of the previous four years.

The headline minimum rate is 15%, but your actual liability depends on Pillar Two income, adjusted covered taxes, jurisdictional blending, the Substance-Based Income Exclusion, safe harbours, de minimis rules and other adjustments.

The biggest task for multinational groups is often the data rather than the tax rate itself. Finance, tax, payroll and group reporting teams need to work from the same entity structure and the same financial information.

If your group is close to the threshold or already within Pillar Two, review your UAE entities early and map the reporting requirements before the first DMTT deadlines.

Frequently Asked Questions