UAE Introduces Top-up Tax for Multinational Enterprises
UAE Introduces Top-up Tax for Multinational Enterprises
The Ministry of Finance in the United Arab Emirates (UAE) has announced a new tax policy called the Top-up Tax for Multinational Enterprises. This policy is detailed in Cabinet Decision No. 142 of 2024 and aligns with the GloBE Model Rules from the Organisation for Economic Co-operation and Development (OECD).
Who Will Be Affected?
The UAE Domestic Minimum Top-up Tax (UAE DMTT) will apply to multinational companies operating in the UAE with global revenues of EUR750 million or more. These companies must meet this revenue threshold in at least two of the four years before the tax applies.
Key Features of the UAE DMTT
The UAE DMTT includes a Substance-based Income Exclusion, which reduces the taxable income by considering payroll and tangible assets. There is also a de minimis exclusion, allowing some entities to have a zero tax rate if they meet specific criteria.
Investment Entities and Transitional Measures
To maintain the UAE's status as a top investment destination, Investment Entities are excluded from this tax. Additionally, during the initial phase of a multinational group's activities, no tax will be levied if certain conditions are met.
For more details, the Cabinet Decision is available on the UAE Legislation's website.
Doubts Revealed
UAE
UAE stands for the United Arab Emirates, which is a country in the Middle East. It is known for its modern cities like Dubai and Abu Dhabi.
Top-up Tax
A Top-up Tax is an additional tax that companies have to pay if their tax rate is below a certain level. It ensures that multinational companies pay a fair amount of tax.
Multinational Enterprises
These are big companies that operate in many countries around the world, not just in one country.
Cabinet Decision No. 142 of 2024
This is a specific rule or law made by the UAE government in the year 2024 about the Top-up Tax.
EUR750 million
EUR750 million means 750 million euros, which is a lot of money. Euros are the currency used in many European countries.
OECD's GloBE Model Rules
OECD is a group of countries that work together on economic issues. GloBE Model Rules are guidelines they made to help countries tax multinational companies fairly.
Exclusions based on payroll and assets
This means some companies might not have to pay the tax if they have certain numbers of employees (payroll) or things they own (assets).
Zero tax rate
A zero tax rate means that some companies might not have to pay any tax at all under certain conditions.
Investment Entities
These are companies or organizations that mainly invest money in other businesses or projects, rather than selling products or services.
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