The Ministry of Finance of the United Arab Emirates has announced the implementation of a minimum 15% tax on large multinational corporations operating within the country, starting January 2025. This initiative is part of the OECD’s global agreement on minimum corporate tax and targets companies with a global consolidated revenue of 750 million euros or more over at least two of the four preceding financial years.
Objectives and Background of the Unprecedented Tax
The Organization for Economic Co-operation and Development (OECD) has spearheaded discussions to establish a fair and transparent fiscal landscape, aiming to curb the tax avoidance practices of multinationals. Nearly 140 countries have joined this agreement, which is structured around two pillars: the first focuses on a fairer distribution of taxation for major digital companies, while the second introduces a 15% minimum tax on corporations.
Implementation Specifics and Economic Consequences
The tax is designed to apply to multinationals whose consolidated global revenue exceeds 750 million euros during at least two of the last four financial periods. This measure could generate approximately 150 billion dollars in annual tax revenues worldwide. The UAE, with its diversified economy and recognition as a pivotal regional hub for trade and tourism, aims to preserve its business-friendly environment while bolstering its competitiveness.
Fiscal Incentives and Strategic Advice for Businesses
To promote innovation, the UAE Ministry of Finance is considering the introduction of new tax incentives, particularly a research and development (R&D) tax that would offer a credit ranging from 30% to 50% for R&D activities conducted locally. These initiatives aim to encourage firms to invest in research while ensuring the country’s economic competitiveness.
The introduction of the new tax on multinationals in the UAE marks a significant milestone in the application of global fiscal standards. This decision not only contributes to a more equitable tax system but also supports innovation and the economic vitality of the Emirates. It is crucial for businesses to adapt to these changes while leveraging the proposed tax incentives to maintain their competitive edge.
