- Domestic Minimum Top-Up Tax (DMTT) Implementation
This is one of the most significant recent changes, following Federal Decree Law No. 60 of 2023:
Effective Date: For financial years starting on or after January 1, 2025.
Purpose: The DMTT ensures that large Multinational Enterprise (MNE) Groups operating in the UAE pay a minimum effective tax rate of 15% on their UAE-sourced profits, aligning with the OECD’s Pillar Two global minimum tax rules.
Applicability: It applies to MNE Groups with consolidated global revenues of €750 million or more in at least two of the four financial years immediately preceding the relevant tax year.
- Updates for Free Zone Entities
The regulations for Qualifying Free Zone Persons (QFZPs) continue to be refined:
Ministerial Decisions (MD No. 229 & 230 of 2025): These decisions specify the Qualifying Activities and Excluded Activities that must be met for a Free Zone Entity to benefit from the 0% CT rate.
Qualifying Income: Clarification continues on what constitutes Qualifying Income for the 0% rate, including income from transactions between a QFZP and another Free Zone Person, and specific types of domestic or foreign income.
Free Zone Mainland Access: Recent local decisions (e.g., in Dubai) allow free zone companies to conduct business activities beyond their designated zones and into the mainland, provided they obtain the necessary licensing and approval from the relevant economic authority. This requires careful consideration of its impact on the Qualifying Income test for CT purposes.
- Mandatory Audited Financial Statements
Ministerial Decision No. 84 of 2025 established new requirements for audited financial statements:
Requirement: Audited financial statements must now be prepared and maintained by:
Qualifying Free Zone Persons (QFZPs).
Taxable Persons (who are not part of a Tax Group) with annual revenue exceeding AED 50 million.
Tax Groups must prepare and maintain audited special purpose financial statements.
- Tax Incentives (Under Consideration)
The Ministry of Finance is considering two new tax incentives to support economic growth and innovation, proposed for implementation in 2025 and 2026:
Refundable Tax Credit for High-Value Employment (Proposed Jan 1, 2025): A percentage of eligible salary costs for highly skilled personnel (e.g., C-suite executives) could be granted as a refundable tax credit.
R&D Tax Incentive (Proposed Jan 1, 2026): An expenditure-based tax credit (potentially 30% to 50%) for businesses that invest in Research and Development activities conducted within the UAE, aligned with OECD guidelines.