Clause (3) of Article (3) of the Corporate Tax Law provides that the Cabinet shall issue a decision governing the imposition of a "Top-up Tax" on Multinational Enterprises, so that their total effective tax rate reaches 15%. Cabinet Decision No. (142) of 2024 on the Imposition of Top-up Tax on Multinational Enterprises was issued to implement this, setting out the scope and computation rules of this tax in detail.
The Core Provision: A Total Effective Rate of 15%
The Federal Decree-Law provides that the Cabinet, on the Minister's proposal, shall issue a decision that "regulates all cases, provisions, conditions, rules, controls and procedures for imposing the Top-up Tax on Multinational Enterprises and exempting them from it, so that their total effective tax rate reaches 15% (fifteen percent)," without prejudice to the normal 0% and 9% Corporate Tax rates.
Scope of Cabinet Decision No. (142) of 2024
Cabinet Decision No. (142) of 2024 applies to Constituent Entities that are members of an MNE Group with annual revenue of EUR 750 million or more in the Consolidated Financial Statements of the Ultimate Parent Entity, in at least two of the four Fiscal Years immediately preceding the tested Fiscal Year. The Decision defines the "Minimum Rate" used to measure whether the effective tax paid is adequate as 15%, with the shortfall imposed as a Top-up Tax if the effective rate actually paid is lower than that.
Effective Date
Cabinet Decision No. (142) of 2024 was issued on 31 December 2024 and provides that it takes effect from 1 January 2025, applying to Fiscal Years beginning on or after that date.
Reporting the Top-up Tax: Ministerial Decision No. (133) of 2026
Ministerial Decision No. (133) of 2026 on the Entities Required to File the Pillar Two Information Return for the Purposes of Cabinet Decision No. (142) of 2024 was issued to govern reporting. It requires each Constituent Entity (excluding any Investment Entity) located in the UAE, each Joint Venture and JV Subsidiary located in the UAE, and each Stateless Constituent Entity that is a Reverse Hybrid Entity created under UAE law, to file a Pillar Two Information Return with the Federal Tax Authority, unless it has already been filed by the Ultimate Parent Entity or another designated filing entity in a jurisdiction that has a qualifying information exchange agreement in effect with the UAE. This obligation applies to Fiscal Years starting on or after 1 January 2025, matching the Top-up Tax's own effective date.
Illustrative Example
An MNE Group whose consolidated revenue exceeded EUR 750 million in two of its last four Fiscal Years has a Constituent Entity resident in the UAE that paid an effective tax rate below 15% on its income in the State. In that case, that Entity is subject to a top-up amount that raises its total effective tax rate to 15%, under Cabinet Decision No. (142) of 2024, regardless of whether the normal 0% or 9% Corporate Tax rate had already applied to it under the Corporate Tax Law.
Legal References
- Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses — Article (3), Clause (3).
- Cabinet Decision No. 142 of 2024 – As published in the Official Gazette, on the Imposition of Top-up Tax on Multinational Enterprises — Article (1), and the Scope and Definitions Articles of the Annexure.
- Ministerial Decision No. 133 of 2026 on the Entities Required to File the Pillar Two Information Return — Articles (2) and (3).
For questions about your specific situation, you can ask the UAE Tax & Legislation Helper on Helpers, or consult a licensed chartered accountant.