The Organisation for Economic Co-operation and Development (OECD), composed of the world's 38 largest economies, has included the UAE's 15% top-up tax on large multinational enterprises in its "transitional qualification" list.

 The Organisation for Economic Co-operation and Development (OECD), composed of the world's 38 largest economies, has included the UAE's 15% top-up tax on large multinational enterprises in its "transitional qualification" list. The UAE Ministry of Finance represent that this move will be providing the  greater transparency for the businesses operating in the UAE.

This domestic minimum top-up tax (DMTT) took effect on January 1 and applies to multinational enterprises with global consolidated revenues of €750 million (US$793 million) or more, and which meet this threshold in at least two of the four fiscal years preceding the applicable tax year.

The OECD's "Central Register of Legislation with Transitional Qualification" lists jurisdictions that have completed the agreed procedures and obtained transitional qualification for the minimum tax. The UAE Ministry of Finance said in a statement on Monday that obtaining this qualification means "multinational enterprise groups can be confident that their profits in the UAE will not be subject to foreign taxation, and other countries will recognize the UAE's top-up tax obligations," with other jurisdictions acknowledging these enterprises' top-up tax liabilities in the UAE, thereby minimizing complex and costly multilateral audit challenges and dispute risks.

The OECD's two-pillar reform plan establishes a global minimum corporate tax to ensure that large multinational enterprises pay at least 15% profit tax in each country where they operate. This initiative aims to address tax challenges arising from economic digitalization and globalization and to set a floor for tax competition. The OECD stated in 2023 that the proposed global minimum tax is expected to generate about $220 billion in additional global revenue annually, equivalent to 9% of global corporate income tax revenue.

The UAE implemented a federal corporate tax starting from fiscal years beginning on or after June 1, 2023, with a standard statutory rate of 9%. Enterprises with annual revenues exceeding AED 375,000 are subject to tax, while taxable profits below this threshold are taxed at a zero rate.

The Ministry of Finance said the UAE's domestic minimum top-up tax also obtained the OECD's second pillar safe harbor qualification, meaning no top-up tax calculation is required in other jurisdictions, reducing administrative burdens for multinational enterprises and tax authorities. David Daly, partner at Gulf Tax Accounting Group, noted: "Safe harbor qualification means multinational organizations operating in the UAE do not have to pay any additional top-up tax — this tax is essentially a penalty imposed for gaining an unfair advantage relative to competitive markets through tax planning structures. The UAE has always been committed to demonstrating its fairness in international trade to supranational bodies and has not implemented market-distorting tax policies; the OECD's recognition is a confirmation of this."