The Ministry of Finance of the United Arab Emirates (UAE) recently released a Cabinet Decision No. 142 introducing a top-up tax in line with the Organisation for Economic Co-operation and Development (OECD) framework, commonly called the GloBE rules or Pillar Two. The Cabinet Decision implements Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, as amended by Federal Decree-Law No. 60 of 2023.
The Cabinet Decision establishes detailed rules for the application of the top-up tax, ensuring that multinational enterprises with low-taxed income in the UAE are subject to a minimum effective tax rate of 15%.
It remains to be seen whether the OECD will grant the UAE the transitional qualified status confirming that the UAE top-up tax is a 'Qualified Domestic Top-Up Tax' for purposes of the application of GloBE Rules by other jurisdictions.
Our Tax Partner, Olivier Remacle, and Tax Principal, Barbara Schwartz, as well as ATOZ Tax Advisers Partner, Andreas Medler, analyse the main provisions of the Cabinet Decision implementing a top-up tax in the UAE and applicable to fiscal years beginning on or after 1 January 2025.