Domestic Minimum Top-up Tax (DMTT) Advisory in UAE

Domestic Minimum Top-up Tax (DMTT) Advisory in UAE

As part of Commitment of UAE to align with OECD’s Global Minimum Taxation through Pillar Two, via Cabinet Decision No.142 of 2024, UAE has implemented Domestic Minimum Top-up Tax (DMTT) with effect from 01 January 2025.

This new top-up tax ensures and applicable to large multinational groups pay a minimum of 15% Effective Tax Rate (ETR), regardless of Free Zone and other tax benefits. An additional filing also required by companies in the UAE who falls under the definition of Multinational Entities (MNEs)

At, Flying Colour Tax Consultant, we provide customized advisory services to MNEs to understand their scope under DMTT, restructuring of operations if needed, and compliances to be taken care which includes filing of DMTT report to Ministry of Finance (MoF) and Federal Tax Authority (FTA)

Who Needs to Comply with DMTT?

You may fall under the DMTT if your group meets the following:

You must assess the applicability of DMTT for your entity in UAE and must comply with regulations if;
Your UAE entity which is either subsidiary or branch or joint venture fall under the definition of MNE by way of generating consolidated revenue more than Euro 750 Million ( Approximately 3.15 Billion Dirhams) in at least two of the four preceding fiscal years.
Your Entity is part of MNE which is operating in more than one countries.
Keep in mind that Domestic Minimum Top-up Tax rules overrides Qualifying Free Zone Person benefits as the DMTT is part of global commitment by UAE.

Example:

A global logistics group headquartered in Singapore earns EUR 5 billion in consolidated revenue. It has a Free Zone company in JAFZA taxed at 0% CT. Under DMTT, the UAE ensures that at least 15% tax is collected locally, preventing other countries from imposing top-up taxes on UAE income.

Key Features of UAE DMTT

Effective Tax Rate (ETR) Test

Groups must calculate their Effective Tax Rate in UAE is below 15% or not. Since UAE has 9% Corporate Tax, in general, the MNEs operating in the UAE will get triggered with additional top-up tax unless exempted by law.

Top-Up Tax Mechanism

If Effective Tax Rate is < 15%, MNEs must pay additional tax to UAE authority to bridge the gap.

Safe Harbour Reliefs (2025–2027 transitional period)

De Minimis Test: UAE revenue < EUR 10M AND UAE profit < EUR 1M → No DMTT applies
Routine Profits Test: Profits ≤ routine return on tangible assets → No DMTT applies
Simplified ETR Test: If simplified calculation shows ≥ 15% → exempt from detailed filing.

Risks of Ignoring DMTT

Top-up tax liability - If UAE does not apply Domestic Minimum Top-up Tax (DMTT), the foreign tax authority may collect difference in tax via Income Inclusion Rule(IIR) or Under Taxed Payment Rule (UTPR)
Loss of Free Zone benefits - MNEs may lose Qualifying Free Zone Benefits with imposing of 15% Effective Tax Rate.
Increased audit risk - MNE data is part of Automatic Information Exchange System (AIES) under Common Reporting Standards (CRS) and the risk of audit is high
Reputational damage – Non-compliance will attract penalties as well as reputational damages for MNEs.

Step-by-Step: How Flying Colour Supports

1

DMTT Impact Assessment

Review group revenue, profits, and UAE entity structure
2

ETR Calculation

Perform detailed modelling under OECD rules
3

Safe Harbour Evaluation

Check if your UAE entities qualify for exemptions.
4

Substance Based Income Exclusion (SBIE)

Based on the payroll cost and tangible assets located in UAE, certain percentage of income are excluded while calculating the Global anti-Base Erosion Income (GloBE Income)
5

Compliance Planning

To minimize exposure, align the corporate structure.
6

Filing & Documentation

Prepare the reports required under DMTT and submit to MoF/ FTA.

FAQs on DMTT

No. Such Free Zone entities can apply safe harbor rule during the transitional period and get exemption from calculating the GloBE income and top-up tax calculations.

If the Free Zone entity considered as MNE for DMTT, instead of 0% Corporate Tax (if Qualifying Free Zone Person) or 9% Corporate Tax (if regular company), 15% effective tax rate is applicable.

Yes, proper structuring of group and increased substance in the Pillar Two jurisdiction can keep the low top-up tax and apply safe harbors during the transitional period.

Why Choose Flying Colour?

Expertise in UAE Corporate Tax & International Taxation

Deep knowledge and expertise in UAE Corporate Tax, Business Structuring, International taxation, and OECD Pillar Two rules.

Tailored Advisory for Multinational Groups

Tailored advisory for Multinational group operating in the UAE.

Experience in Impact Assessment & Compliance Filings

Extensive experience in impact assessment of MNEs and compliance filings.

Get Expert DMTT Advisory – Contact Us Today

For expert Domestic Minimum Top-up Tax (DMTT) Advisory, contact Flying Colour Tax Consultant LLC. Let us help your multinational group comply with UAE's latest obligations while optimizing tax exposure and risk.

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