Starting in 2025, the UAE will implement major changes to its corporate tax system by introducing the new corporate tax in the UAE. A DMTT rate of 15% will apply to large corporations, while tax incentives will be provided to encourage innovation and growth. Entrepreneurs must prepare strategically for these transformations.
Are you wondering how the new tax amendments in the UAE could affect your business? If you are an entrepreneur or a company owner, understanding the details of the new corporate tax in the UAE is essential. The UAE has announced a new corporate tax system targeting large companies, aligning with international standards of transparency and fairness, which could reshape the investment environment.
In this article, we explore the details of the new corporate tax , the DMTT system, implementation timelines, incentives, and practical tips to help you adapt effectively to the upcoming changes.
What is the DMTT System under the New Corporate Tax in the UAE?
What is DMTT and how is it applied?
The DMTT system, or “Domestic Minimum Top-up Tax,” is one of the main pillars of the new corporate tax in the UAE. It imposes a minimum tax rate of 15% on the profits of multinational corporations with annual revenues exceeding €750 million, in line with OECD standards.
The system will be implemented from January 1, 2025, aiming to prevent profit shifting and ensure fair taxation in countries where businesses generate actual revenues.
Which Companies are Targeted by the New Corporate Tax in the UAE?
The new corporate tax in the UAE does not affect all businesses. It mainly targets large corporations with high revenues. Any company within a business group that records annual global revenues above €750 million will be required to pay the 15% tax in the UAE, even if previously exempt.
Small and medium-sized enterprises (SMEs) will remain exempt for now, allowing them to continue growing before facing these new obligations.
What is the Purpose of the New Corporate Tax in the UAE?
The introduction of the new corporate tax in the UAE reflects the global effort to ensure tax fairness and limit practices that transfer profits to low-tax jurisdictions.
As a global economic hub, the UAE aims to strengthen its international position, attract responsible investments, and ensure long-term economic stability by aligning with international tax standards.
Incentives Offered under the New Corporate Tax in the UAE
1. Research and development (R&D) incentives
To balance obligations and growth, the new corporate tax in the UAE provides generous deductions of 30% to 50% on R&D-related expenses such as product development, technology, and service improvements.
2. Support for high-value employment
Another incentive under the new corporate tax in the UAE is tax relief for hiring highly skilled employees. Companies can benefit from deductions on the salaries of top talent, encouraging both local workforce development and international recruitment.
3. Refundable tax credits
The new corporate tax in the UAE also introduces refundable tax credits, enabling companies in priority sectors like renewable energy, advanced manufacturing, and technology to reclaim part of their paid taxes. This enhances liquidity and supports reinvestment in growth.
When Will the New Corporate Tax in the UAE Take Effect?
DMTT implementation date
The UAE Ministry of Finance confirmed that the new corporate tax in the UAE will officially take effect on January 1, 2025.
Incentives start date
While the tax applies from 2025, incentives such as R&D and employment support are expected to begin in early 2026, giving companies time to adapt.
How to prepare?
Preparing for the new corporate tax in the UAE requires a full review of financial structures, contracts, and international agreements. Businesses should engage legal and tax experts to ensure compliance and avoid penalties.
Why is the UAE Introducing the New Corporate Tax?
Strategic objectives
The UAE aims with the new corporate tax in the UAE to align with global tax reforms, adopt OECD’s Global Minimum Tax, and strengthen its competitiveness as a responsible international business hub.
Impact on the business environment
Although it may seem challenging, the new corporate tax in the UAE will enhance long-term investor trust, level the playing field between companies, and improve transparency and competitiveness.
Opportunities for entrepreneurs
Entrepreneurs can benefit from the new corporate tax in the UAE by restructuring operations to maximize incentives and investing in strategic sectors, ensuring sustainable growth.
How Should Companies Handle the New Corporate Tax in the UAE?
1. Conduct an initial tax assessment
Companies must analyze whether they fall under the scope of the new corporate tax in the UAE by reviewing revenue sources, legal structures, and international operations.
2. Build a tax strategy
An effective tax strategy under the new corporate tax in the UAE should involve financial and legal teams as well as external advisors, focusing on legally minimizing obligations and maximizing incentives.
3. Seek professional assistance
Firms with international operations should rely on professional consultants to ensure smooth compliance with the new corporate tax in the UAE, avoiding costly errors.
What Should Entrepreneurs Know About the New Corporate Tax in the UAE?
Final recommendations
Business owners are advised to start planning early for the new corporate tax in the UAE by hiring tax consultants and designing strategies to make full use of incentives.
Tools for adaptation
The government provides guides, workshops, and online support channels to help businesses understand the new corporate tax in the UAE. Advanced accounting software is also recommended.
Where to get support
Advisory firms, chambers of commerce, and business support centers in the UAE offer consultations and training to help companies transition smoothly into the new corporate tax in the UAE framework.
FAQs
1. Which companies are covered under the DMTT in the UAE?
Only businesses with annual revenues exceeding €750 million fall under the new corporate tax in the UAE. SMEs are currently exempt.
2. Can the tax burden be reduced through incentives?
Yes. Companies investing in R&D or employing top talent can significantly reduce their obligations under the new corporate tax in the UAE.
3. What is the best way to prepare for the new corporate tax in the UAE?
The best approach is to review financial structures, build a solid tax strategy with experts, and attend official workshops to fully understand the system.
BY Amjad Khaddam
