How MNEs can prepare for the UAE’s DMTT rollout

The UAE has introduced a Domestic Minimum Top-Up Tax (DMTT) aligning with the global 15 per cent minimum tax rate under OECD’s Pillar Two framework. What key challenges should multinational companies prioritise?

The introduction of the UAE’s Domestic Minimum Top-Up Tax, effective from January 1, 2025, marks a significant shift in the tax landscape, aligning us with the global push for a 15 per cent minimum effective tax rate for large multinational enterprises (MNEs) — those with global revenues exceeding €750 million.

While this ensures fairer taxation globally, it presents considerable hurdles for businesses operating here.

The primary challenge lies in data complexity. Compliance demands an unprecedented volume of granular data often scattered across disparate financial, HR, and operational systems. Sourcing, validating, and standardising this data is a monumental task requiring cross-functional collaboration.

Secondly, systems and technology often fall short. Many existing ERP and reporting systems weren’t designed for these intricate calculations, necessitating significant investment in upgrades, new software, or specialised platforms.

Thirdly, the compliance and administrative burden is substantial. MNEs face complex new calculations for Effective Tax Rates (ETR) and potential top-up taxes, alongside new filing obligations like the GloBE Information Return (GIR) and the specific UAE DMTT return.

Businesses must anticipate the financial and strategic impact, including potential increases in cash tax liabilities and the reduced effectiveness of certain tax incentives.

How can MNEs prepare for DMTT?

To prepare, MNEs must act proactively:

Conduct a thorough assessment now to understand your specific ETR in the UAE and other jurisdictions, identify potential top-up tax exposure, and evaluate eligibility for transitional safe harbours which can offer temporary compliance relief.

Map required data points against existing sources, identify gaps, and implement robust processes and governance for data collection and validation.

Determine the necessary system upgrades or new technology solutions to handle the complex calculations

The rules are complex and evolving. Partnering with advisors who possess deep expertise in both the global Pillar Two framework and the specific nuances of the UAE’s DMTT is crucial for navigating this successfully.

N R Doshi & Partners, we are equipped to guide businesses through these complexities, ensuring compliance and strategic alignment in this evolving global tax landscape.