UAE Pillar Two / Domestic Minimum Top-up Tax (DMTT)
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UAE Pillar Two / Domestic Minimum Top-up Tax (DMTT)
In October 2021, the OECD/G20 Inclusive Framework on BEPS reached agreement on a Two-Pillar solution to address the tax challenges arising from the digitalisation of the economy. Pillar Two introduces a Global Minimum Tax of 15% on Multinational Enterprise (MNE) Groups, implemented through the Global Anti-Base Erosion (GloBE) Model Rules. The UAE has adopted Pillar Two domestically through Federal Decree-Law No. 60 of 2023, Cabinet Decision No. 142 of 2024, and Ministerial Decision No. 88 of 2025. The Domestic Minimum Top-up Tax (DMTT) is effective for fiscal years starting on or after 1 January 2025.
Pillar Two Landscape:
- Oct 2021 – OECD/G20 Inclusive Framework agrees the Two-Pillar Solution
- Dec 2021 – OECD releases GloBE Model Rules
- Oct 2023 – UAE issues Federal Decree-Law No. 60 of 2023
- March 2024 – UAE MoF holds public consultation on Global Minimum Tax
- Dec 2024 – UAE MoF announces introduction of DMTT
- Feb 2025 – Cabinet Decision No. 142 of 2024 published in the Official Gazette
- 2025 – Ministerial Decision No. 88 of 2025 adopts the OECD Commentary and Agreed Administrative Guidance
- 1 Jan 2025 – Effective date of DMTT in the UAE
Key Takeaways
MNE Group: An MNE Group means any Group that includes at least one Entity or Permanent Establishment that is not located in the jurisdiction of the Ultimate Parent Entity (UPE) of the Group.
Revenue Threshold: The DMTT applies to Constituent Entities of an MNE Group whose annual revenue in the Consolidated Financial Statements of the UPE is EUR 750 million or more in at least two of the four fiscal years preceding the tested fiscal year.
Constituent Entity: Includes any Entity or Permanent Establishment of an MNE Group located in the UAE, together with specified Joint Ventures, JV Subsidiaries, and certain Reverse Hybrid Entities, as defined under Cabinet Decision No. 142 of 2024.
Excluded Entities: Government Entities, Non-profit Organisations, Pension Funds, Investment Funds acting as UPEs, and Real Estate Investment Vehicles are not subject to Top-up Tax, subject to the prescribed conditions.
Free Zone Persons: Free Zone Entities, including Qualifying Free Zone Persons (QFZPs), are not automatically excluded from the DMTT. Where they form part of an in-scope MNE Group, their UAE profits remain subject to DMTT analysis regardless of their 0% Corporate Tax status.
Charging Mechanism
Effective Tax Rate (ETR)
The ETR for the UAE is computed by dividing the Adjusted Covered Taxes of UAE Constituent Entities by their Pillar Two Income for the Fiscal Year. Pillar Two Income is derived from financial accounting net income, adjusted for specified inclusions and exclusions prescribed under the Cabinet Decision.
op-up Tax
Where the ETR for the UAE falls below the Minimum Rate of 15%, a Top-up Tax is imposed to bring the effective rate up to 15% on the Excess Profit, being Pillar Two Income as reduced by the Substance-based Income Exclusion.
Transitional Safe Harbours
Cabinet Decision No. 142 of 2024 provides Transitional Country-by-Country Reporting (CbCR) Safe Harbours for the initial years of application. Where any one of the de minimis test, simplified ETR test, or routine profits test is satisfied based on Qualified CbC Report data, the Top-up Tax for the UAE is deemed to be zero for that Fiscal Year.
DMTT Compliance Requirements
Registration
Each in-scope Constituent Entity is required to register with the Federal Tax Authority (FTA) for DMTT purposes.
Top-up Tax Return and GloBE Information Return
The Top-up Tax Return is due 15 months after the end of the relevant financial year, extended to 18 months for the first year of application. The GloBE Information Return is filed within the same timelines.
Payment of Top-up Tax
Top-up Tax, if any, is payable within the period prescribed for filing of the Top-up Tax Return.
Pillar Two Consultancy Services We Offer:
- DMTT impact assessment and in-scope determination
- MNE Group structure analysis and Constituent Entity mapping
- Transitional CbCR Safe Harbour eligibility review and documentation
- Effective Tax Rate (ETR) computation and modelling
- Substance-based Income Exclusion analysis
- DMTT registration with the Federal Tax Authority
- Top-up Tax Return and GloBE Information Return preparation and filing
- Free Zone and Qualifying Free Zone Person Pillar Two impact analysis
- Joint Venture, Permanent Establishment, and Reverse Hybrid Entity analysis
- Group restructuring and tax planning advisory in light of Pillar Two
- Pillar Two governance, data, and reporting process design
- Coordination with foreign IIR / UTPR compliance for outbound UAE groups
- FTA audit and enquiry assistance on DMTT matters
- Pillar Two training and capacity-building sessions
Strategic Guidance for UAE Pillar Two and Domestic Minimum Top-up Tax Compliance.
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