The Ministry of Finance announces amendments to the Corporate and Business Tax Law

The Ministry of Finance announced new amendments to some provisions of Federal Decree Law No. 47 of 2022 regarding corporate and business tax, with the aim of enhancing the business environment in the UAE and achieving greater compatibility with global tax transparency and fairness standards.

The amendments include the introduction of a minimum local supplementary tax, and tax incentives to support growth and innovation.

Regarding the introduction of the minimum local supplementary tax, the Ministry stated that, in addition to the issuance of Federal Decree Law No. 60 of 2023, the minimum local supplementary tax (DMTT) will be introduced, which will enter into force as of the fiscal years beginning on or after January 1, 2025.

This measure reflects the UAE’s commitment to implementing the “Two-Pillar Solution” project of the Organization for Economic Co-operation and Development (OECD), which aims to achieve global tax justice by imposing a minimum effective tax rate of 15% on the profits of large multinational companies in all countries in which they operate.

The DMTT will apply to multinational companies with consolidated global revenues of €750 million or more in at least two out of four fiscal years preceding the fiscal year in which the system applies.

This measure will also be implemented in a manner that is largely consistent with the model rules issued by the Organization for Economic Cooperation and Development, with the Ministry of Finance to announce more details about this legislation at a later date.

As for tax incentives to support growth and innovation, the Ministry indicated that, as part of its commitment to enhancing the business environment and supporting sustainable growth and innovation, the Ministry of Finance is currently studying providing a set of new tax incentives in accordance with Federal Decree Law No. 47 of 2022.

Among these incentives, a tax incentive will be introduced to support research and development (R&D) activities, which aims to encourage innovation and economic growth within the country. Based on the results of the public consultations conducted in April 2024, this incentive is expected to come into effect from tax periods beginning on or after January 1, 2026.

The tax incentive for research and development will be based on expenditures and will be provided in the form of a potential tax credit of between 30% and 50%, refundable based on the company’s revenues and the number of its employees within the Emirates, and the scope of eligible activities will be determined according to the “Frascati” guide of the Organization for Economic Cooperation and Development. Ensuring that all eligible activities are practiced within the country.

Moreover, the Ministry is considering providing another tax incentive related to high-value employment activities, with the aim of encouraging companies to engage in activities that contribute to achieving significant economic benefits, stimulating innovation and enhancing the competitiveness of the UAE.

This incentive is expected to take effect as of January 1, 2025, as it will be granted as a percentage of eligible salary costs to employees in jobs that provide high economic value, including senior executives and core cadres who add significant value to the national economy.

According to the Ministry, the final form and implementation of these proposed incentives is subject to legislative approvals, provided that the Ministry of Finance provides additional details and guidance on these incentives in a timely manner.