On 25 August 2025, the UAE Ministry of Finance announced that the Organisation for Economic Co-operation and Development (OECD) has granted Transitional Qualified Status to the UAE’s Domestic Minimum Top-up Tax (DMTT). The OECD has included the UAE’s DMTT in its Central Record of Legislation with Transitional Qualified Status, confirming international recognition of the UAE’s framework.
This step is significant for multinational enterprises (MNEs) operating in the UAE because:
- Exemption from foreign top-up taxation: UAE profits subject to the DMTT will not trigger additional top-up taxes in other jurisdictions.
- OECD Pillar Two Safe Harbour eligibility: MNEs will not need to recalculate top-up tax obligations for UAE entities in other jurisdictions.
- Reduced audit risks: OECD recognition lowers the probability of double taxation, multilateral audits, and disputes.
- Administrative simplification: The safe harbour regime reduces the reporting and compliance burden for both taxpayers and the Federal Tax Authority.
The DMTT will apply from 1 January 2025 to MNE groups with annual consolidated revenues of at least EUR 750 million in at least two of the preceding four fiscal years. It aligns broadly with the OECD’s Global Anti-Base Erosion (GloBE) Model Rules, ensuring a minimum effective tax rate (ETR) of 15% in the UAE.
I. OECD Pillar Two
Pillar Two is part of the OECD/G20 Inclusive Framework’s Base Erosion and Profit Shifting (BEPS) Project, which aims to establish a global minimum tax of 15% for large multinational enterprises. Its primary tools are:
- Income Inclusion Rule (IIR): Requires parent companies to pay top-up tax on low-taxed income of foreign subsidiaries.
- Undertaxed Profits Rule (UTPR): Allocates taxing rights to other jurisdictions if income is not adequately taxed.
- Domestic Minimum Top-up Tax (DMTT): Allows jurisdictions to apply the minimum tax themselves, ensuring tax revenues remain domestic rather than flowing abroad.
More than 140 jurisdictions, including the UAE, are part of the Inclusive Framework. The OECD’s transitional safe harbours aim to ease implementation in the early years and provide legal certainty to businesses.
II. UAE’s DMTT
- Introduced under Cabinet Decision No. 142 of 2024, effective FY 2025.
- Applies only to large MNEs (EUR 750m threshold).
- Excludes entities such as governmental bodies, international organisations, pension funds, and certain investment funds.
- Includes transitional safe harbours (e.g. CbCR-based) and de minimis rules.
- Filing and payment deadlines: 15 months after fiscal year-end (18 months in transition year).
By adopting the DMTT, the UAE ensures that it collects the minimum tax domestically, protecting its tax base while remaining fully aligned with OECD rules.
III. Conclusion
OECD recognition means UAE-based profits will not be taxed again abroad under Pillar Two and Safe Harbour rules reduce duplication of reporting and administrative costs.
- Immediate actions for MNEs:
- Assess group exposure to DMTT (scope, revenue thresholds, exclusions).
- Review financial statement disclosures for 2024 and prepare interim reporting for 2025.
- Ensure qualified Country-by-Country Reporting (CbCR) standards to benefit from transitional safe harbours.
- Adapt transfer pricing and internal allocation mechanisms to align with new requirements.
