The 15% minimum tax in the UAE is part of the OECD’s Global Minimum Tax framework (Pillar Two), designed to ensure that large multinational corporations with annual revenues over €750 million (AED 3.15 billion) pay a fair amount of tax. Effective from January 1, 2025, this tax mainly affects big businesses operating in the UAE, including those in free zones and the mainland, while small businesses, startups, and individuals remain unaffected. The goal is to prevent profit shifting to low-tax countries and create a fairer tax system. Companies falling under this rule must review their tax strategies, maintain compliance, and plan their finances effectively to avoid penalties. To stay informed and meet legal requirements, businesses should consult tax advisors or visit the UAE Ministry of Finance portal for updates.

What is the 15% Minimum Tax in the UAE?

The 15% minimum tax is a corporate taxation rule that applies to multinational companies with global revenues of at least EUR 750 million (AED 3.2 billion). It ensures that such companies pay at least 15% corporate tax on their profits, regardless of where they are headquartered. This tax is in line with the Organisation for Economic Co-operation and Development OECD’s Pillar Two framework, which aims to create a level playing field for global taxation and reduce tax avoidance.

Why Was the 15% Minimum Tax Introduced?

The UAE government has adopted this tax for several key reasons:

  • Aligning with global tax standards: The UAE is part of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS).

  • Preventing profit shifting: Large corporations can no longer shift profits to low-tax jurisdictions.

  • Enhancing economic transparency: The tax aims to make the UAE’s business environment more transparent.

  • Maintaining global competitiveness Ensuring that businesses operating in the UAE remain compliant with international tax rules.

Who Will Be Affected by the 15% Minimum Tax?

The tax primarily affects multinational enterprises (MNEs) meeting the following criteria::

  • Annual global revenues exceeding EUR 750 million

  • Companies operating in multiple countries

  • Businesses that previously benefited from UAE’s 0% corporate tax rate

However, small and medium enterprises (SMEs) and local businesses are not subject to this tax.

How Does the Minimum Tax Impact Businesses in the UAE?

Businesses operating in the UAE will experience several financial and operational changes:

  • Increased tax liabilities: Eligible MNEs must now pay at least 15% tax on profits.

  • Revised tax planning strategies: Businesses must restructure their financial models to accommodate new tax obligations.

  • Regulatory compliance requirements: Companies must ensure accurate financial reporting to avoid penalties.

  • Impact on free zones: Businesses in UAE free zones may face changes in existing tax incentives.

Steps to Ensure Compliance with the 15% Minimum Tax

Businesses should take the following measures to stay compliant:

  • Assess tax obligations: Determine if the tax applies to your company based on revenue thresholds.

  • Update financial records: Maintain accurate and transparent financial documentation.

  • Consult a tax advisor: Work with a corporate tax expert to navigate new requirements.

  • Re-evaluate business structure : Adjust business models to optimize tax efficiency.

  • Monitor regulatory updates: Stay informed about any modifications in tax laws to avoid penalties.

Frequently Asked Questions


Does the 15% minimum tax apply to all businesses in the UAE? +
No, this tax only applies to multinational corporations with global revenues above EUR 750 million. SMEs and local businesses are exempt.
How does this tax affect companies in UAE free zones? +
UAE free zones offer tax incentives, eligible MNEs operating in these zones may still be subject to the 15% minimum tax.
Will this tax impact foreign investments in the UAE? +
The UAE remains an attractive destination for businesses due to low overall tax rates, strategic location, and strong economic policies.

Conclusion

The 15% minimum tax in the UAE is a significant shift in the country’s corporate tax policy, aligning with global tax transparency standards. While it affects only large multinational corporations, businesses must stay informed, prepare accordingly, and ensure compliance to avoid legal repercussions. Need help understanding your corporate tax obligations? Consult with our tax experts at Arabian Business Center today and ensure your business stays compliant with UAE tax laws!

For further assistance, consult with an Amer Centre to ensure all requirements are met.

UAE 15% Minimum Tax | Minimum Tax | OECD Minimum Tax | Global Minimum Corporate Tax