The UAE’s Ministry of Finance (MoF) is seeking corporate feedback on the implementation of a global minimum tax in the country. The consultation is open to all stakeholders, but the Ministry is “particularly keen” to hear from the global community of multinational groups operating in the UAE, along with their advisors, service providers, and investors. Submissions will inform the Ministry on aspects such as domestic implementation issues, interactions with the UAE’s Corporate Tax system, ways to minimize compliance costs, and policy options for potential implementation of the income inclusion rule, undertaxed profits rule, and a domestic minimum top-up tax. Relevant stakeholders must submit their responses by April 10 via the Ministry’s website.
The global minimum tax (GMT) targets multinational enterprises with annual consolidated revenue of or above €750 million, ensuring that these MNEs pay a minimum tax of 15% in respect of the excess profits derived from every jurisdiction they operate in. The GMT consists of two interlocking rules, the income inclusion rule (IIR) and the undertaxed profits rule (UTPR), collectively known as the global anti-base erosion rules or GloBE rules. The aim of the GMT is to establish a universal benchmark for corporate taxation, ensuring that MNEs contribute their fair share and maintain a level playing field in the business landscape.
The UAE has launched a digital public consultation on implementing the global minimum tax in the country, but the document is only for obtaining input from relevant stakeholders and does not reflect the final view of the UAE. The UAE will announce details on the implementation of the tax in due course. Companies in the UAE meeting the criteria for the GMT, regardless of industry, will be subject to the tax. The UAE signed up for the GMT agreement in November 2023 and has taken significant steps towards aligning with global tax reforms.
The income inclusion rule (IIR) ensures that the profits of multinational enterprises are subject to at least a minimum tax rate globally. The undertaxed profits rule (UTPR) acts as a secondary mechanism to the IIR, denying tax deductions for companies making payments to related entities in low-tax jurisdictions. The domestic minimum top-up tax (DMTT) allows countries to implement their own minimum tax rules aligning with global principles, with DMTT taking precedence over the IIR and UTPR.
Implementation of a minimum tax for companies is already underway in some countries, including Ireland, Luxembourg, Switzerland, and Barbados. More than 40 countries globally are progressing towards implementing the minimum tax, marking a significant shift in international tax policies. The UAE’s consultation questionnaire covers various aspects of GMT implementation, design of potential domestic top-up tax, and administration matters. The tax deal aims to prevent significant disparities in the business landscape and establish a baseline for corporate taxation on a global scale.
