The UAE Domestic Minimum Top-up Tax raises the tax floor to 15%, but only for one narrow group: entities that belong to a multinational group with annual revenue of EUR 750 million or more in the consolidated financial statements of the ultimate parent, in at least two of the four fiscal years immediately preceding the tested year. Cabinet Decision No. 142 of 2024 took effect on 1 January 2025 and applies to fiscal years beginning on or after that date. Every UAE business below that threshold stays exactly where it was, on 9% or on 0%.

This guide reads the Cabinet Decision itself rather than summarizing summaries of it. It sets out who is inside the scope and who is expressly excluded, how the top-up amount is computed from an effective tax rate that is calculated for the country as a whole rather than company by company, the two carve-outs that shrink the tax base, the safe harbors that can reduce the liability to zero, what the rule actually does to a free zone company sitting on a 0% rate, and the registration, filing and payment deadlines that follow.

What the UAE Domestic Minimum Top-up Tax Actually Is

The DMTT is a top-up charge that brings the effective tax rate on UAE profits of in-scope multinational groups up to 15%. It is not a new headline rate. If a group’s UAE effective rate is already 15% or more, the top-up percentage is zero and no DMTT is payable. The test is applied to all of the group’s UAE entities combined, not to each company separately.

The scope rule is a group-level revenue test, not a profit test and not a UAE-revenue test. A group qualifies if the ultimate parent’s consolidated financial statements show annual revenue of EUR 750 million or more in at least two of the four fiscal years immediately before the year being tested. Where one of those years is shorter or longer than 12 months, the decision requires the EUR 750 million threshold to be adjusted proportionally to the length of that year. A group headquartered in Germany with a single Dubai subsidiary is in scope. A purely UAE group with AED 200 million of revenue is not, and never becomes so by growing its UAE profit alone.

The charging provision reaches three categories: constituent entities located in the UAE during the fiscal year, including members of a minority-owned subgroup; joint ventures and JV subsidiaries located in the UAE; and stateless constituent entities created under UAE law that are reverse hybrid entities. Groups may appoint a domestic designated filing entity to pay on behalf of the others, which is how most in-scope groups will administer it in practice.

Does the DMTT replace the 9% UAE corporate tax?

No. The DMTT sits on top of the existing regime rather than replacing it. An in-scope group still calculates and pays corporate tax under the standard UAE rules, and the tax it pays there counts toward the effective tax rate that the DMTT then tests against 15%. The two regimes have different tax bases: corporate tax starts from UAE accounting profit with UAE adjustments, while the DMTT starts from the financial accounting income used in the parent’s consolidated accounts, then applies the Pillar Two adjustments in Article 3 of the decision. The numbers will not match, and a group that pays 9% corporate tax does not automatically have a 9% effective rate for DMTT purposes.

The decision also imports four provisions of the Corporate Tax Law directly: the general anti-abuse rule, record keeping, clarifications, and assessment and penalties. References to a taxable person are read as references to a constituent entity, and references to corporate tax include the top-up tax.

Which entities are excluded from the DMTT entirely?

Article 1.5 lists six excluded entity types: a governmental entity, an international organization, a non-profit organization, a pension fund, an investment fund that is an ultimate parent entity, and a real estate investment vehicle that is an ultimate parent entity. Note the qualifier on the last two. An investment fund lower down a group structure is not excluded on that basis; it must be the ultimate parent.

Holding structures beneath those entities can also be excluded. Where at least 95% of an entity’s value is owned by excluded entities and it exists only to hold assets or invest funds for them, or only carries out ancillary activities, it is excluded. A separate 85% ownership limb applies where substantially all of the entity’s income is excluded dividends or excluded equity gains. A filing constituent entity may elect not to treat an entity as excluded under these derived limbs, and that election runs for five years.

Separately, and importantly, Article 2.3 states that an investment entity located in the UAE is not subject to the top-up tax, and Article 5.1.3 removes investment entities from both the numerator and the denominator of the effective tax rate calculation. A sovereign wealth fund meeting the governmental entity definition is not treated as an ultimate parent entity.

How the 15% Floor Is Calculated

The calculation runs in four steps: compute the UAE effective tax rate, subtract it from 15% to get the top-up percentage, reduce net income by the substance-based income exclusion to get excess profit, then multiply. The formula in Article 5.2.3 is: Top-up Tax = (Top-up Tax Percentage x Excess Profit) + Additional Current Top-up Tax.

The effective tax rate is jurisdictional. It equals the sum of adjusted covered taxes of every constituent entity located in the UAE, divided by the net Pillar Two income of the UAE for the year. Net Pillar Two income is the Pillar Two income of all UAE constituent entities minus the Pillar Two losses of all of them. This blending is the single most consequential design feature for UAE groups: a profitable free zone company taxed at 0% and a mainland company taxed at 9% are averaged together, so the group’s exposure depends on its overall UAE mix rather than on any one entity.

Term in the decision What it means in practice
Minimum Rate Defined in the decision as fifteen percent (15%). Fixed, not indexed.
Effective Tax Rate Adjusted covered taxes of all UAE constituent entities, divided by net Pillar Two income of the UAE. Calculated for the whole country, not per company.
Top-up Tax Percentage 15% minus the effective tax rate, if the result is positive. Zero otherwise.
Excess Profit Net Pillar Two income minus the substance-based income exclusion. This, not total profit, is what the top-up percentage is applied to.
Additional Current Top-up Tax A recalculation charge that can arise from prior-year adjustments even when the current-year percentage is nil.

A group can be in scope, have a UAE effective rate below 15%, and still owe nothing, because the substance-based income exclusion has already removed all of its net income before the percentage is applied. That is a common outcome for capital-heavy and headcount-heavy UAE operations, and it is the reason the carve-out matters more than the rate.

The Substance-Based Income Exclusion and Its Transitional Rates

The substance-based income exclusion removes a fixed percentage of UAE payroll costs and of the carrying value of UAE tangible assets from the tax base. The permanent rate is 5% of each, but transitional rates apply until 2033 and start much higher: 9.6% of payroll and 7.6% of tangible assets for fiscal years beginning in 2025.

The payroll carve-out covers eligible payroll costs of eligible employees performing activities for the group in the UAE, excluding costs capitalized into tangible assets and costs attributable to excluded international shipping income. The tangible asset carve-out covers property, plant and equipment located in the UAE, natural resources located in the UAE, a lessee’s right of use of UAE tangible assets, and a government licence for the use of immovable property or exploitation of natural resources that entails significant investment in tangible assets. Investment entities are excluded from the carve-out calculation.

Article 9.2 replaces the 5% figure with a declining schedule. These are the rates that will actually apply to every filing made this decade:

Fiscal year beginning in Payroll carve-out rate Tangible asset carve-out rate
2025 9.6% 7.6%
2026 9.4% 7.4%
2027 9.2% 7.2%
2028 9.0% 7.0%
2029 8.2% 6.6%
2030 7.4% 6.2%
2031 6.6% 5.8%
2032 5.8% 5.4%
2033 onward 5.0% 5.0%

The exclusion is optional. A filing constituent entity may make an annual election not to apply it, simply by not computing or claiming it in the return. That sounds perverse until you recall that a smaller exclusion means a larger excess profit but can interact with safe harbor tests and with foreign parent-level rules, so some groups will model both.

What actually happens when a group runs the numbers

Consider a UAE group inside a EUR 3 billion multinational with AED 120 million of net Pillar Two income, AED 90 million of annual UAE payroll and AED 400 million of UAE property, plant and equipment, for a year beginning in 2026. The carve-out is 9.4% of 90 million plus 7.4% of 400 million, which is 8.46 million plus 29.6 million, or AED 38.06 million. Excess profit is AED 81.94 million. If the group’s UAE effective tax rate is 9%, the top-up percentage is 6 points and the DMTT is roughly AED 4.9 million. If the same group had no tangible assets and a small payroll, the top-up would be close to AED 7.2 million on the same profit. Substance is the variable, not the rate.

The De Minimis Exclusion and the Transitional CbCR Safe Harbor

Two separate reliefs can drop the UAE top-up tax to zero. The de minimis exclusion applies where average UAE revenue is under EUR 10 million and average UAE income is under EUR 1 million, both measured over three years. The transitional country-by-country reporting safe harbor applies during the transition period if any one of three tests is met.

The de minimis election is annual, and the averages are taken over the current fiscal year and the two preceding ones. Where there were no constituent entities with UAE revenue or losses in the first or second preceding year, those years are dropped from the average rather than counted as nil, which materially changes the result for recently established UAE operations.

The transitional safe harbor is the more widely used relief in the first years. Under Article 8.2.1.1 the UAE jurisdictional top-up tax is deemed zero if the group’s qualified country-by-country report shows UAE total revenue under EUR 10 million and profit before income tax under EUR 1 million, or the group’s simplified effective tax rate in the UAE meets the transition rate, or UAE profit before income tax is equal to or less than the substance-based income exclusion amount. The third of these is the routine escape route for asset-heavy UAE operations.

The transition rate is not 15%. The decision defines it as 16% for fiscal years beginning in 2025 and 17% for fiscal years beginning in 2026, so a group relying on the simplified effective tax rate limb must clear a higher bar than the underlying minimum rate.

What the DMTT Means for Free Zone Companies

This is the practical question most UAE readers arrive with, and the answer has two halves. If your free zone company is not part of a EUR 750 million group, nothing changes: the 0% rate on qualifying income for a qualifying free zone person is untouched by this decision, and so is small business relief for revenue under AED 3 million.

If your free zone company is part of an in-scope group, the 0% rate survives in law but stops delivering a 0% outcome. Because the effective tax rate is blended across all UAE constituent entities, a large free zone profit taxed at 0% drags the UAE-wide rate below 15% and pulls the top-up charge onto the group. The relief has not been withdrawn; it has been neutralized at the group level for the largest groups only. The same logic applies to any UAE entity benefiting from an exemption or a reduced rate.

The practical consequence is that group structuring decisions that used to be driven by free zone selection now turn on where UAE payroll and tangible assets sit, because those are the only inputs that reduce excess profit. A group whose UAE substance is real and located in the same entities as its UAE profit will often land inside a safe harbor. A group whose UAE profit is disproportionate to its UAE people and assets will not.

Registration, Returns, Payment and Deadlines

Any entity subject to the top-up tax, and any domestic designated filing entity, must register with the Federal Tax Authority in the form, manner and timeline prescribed by the FTA. The top-up tax return is due no later than 15 months after the last day of the reporting fiscal year, extended to 18 months for the year that is the first transition year. Payment is due in UAE dirhams on the date the return is due.

Obligation Rule in Cabinet Decision 142 of 2024
Registration Article 13.1. Timeline set by the FTA. The FTA may also register an entity on its own initiative, effective from the date registration was required.
Top-up tax return Article 8.1.2. Within 15 months of the fiscal year end, or 18 months where that year is the first transition year.
Payment Article 11.1. In UAE dirhams, on the date the return is due. No separate later payment date.
Pillar Two Information Return Article 15. Filed on the OECD standard template by entities specified in a Ministerial decision.
Liability if unpaid Article 12. All UAE constituent entities of the domestic main group are jointly and severally liable for the full amount.
Deregistration Article 13.3. Required when the entity ceases to exist or ceases to be in scope.

For a group with a 31 December year end, the first in-scope year is the year ended 31 December 2025, and the 18-month transition-year extension puts the first return and the first payment at 30 June 2027. The joint and several liability rule in Article 12 is worth reading twice: it is not limited to the entity that generated the profit, so a small UAE service company inside the group can be pursued for the whole domestic group’s top-up tax.

Registration is administered through the same EmaraTax portal used for corporate tax registration, and the ordinary corporate tax return deadlines and penalties continue to run alongside the DMTT cycle rather than being replaced by it.

The Penalty Relief Window, and What the UAE Has Not Introduced

Article 14.3 creates a transitional penalty shield. For a fiscal year beginning on or before 31 December 2026, but not including a fiscal year ending after 30 June 2028, no penalties or sanctions apply in connection with filing the top-up tax return or the Pillar Two information return where the FTA considers that the group took reasonable measures to apply the rules correctly. This is relief from penalties for good-faith error, not relief from the tax itself, and it does not survive a failure to file at all.

Cabinet Decision 142 of 2024 implements the domestic minimum top-up tax only. It does not introduce an income inclusion rule or an undertaxed profits rule for UAE-parented groups, which are the two Pillar Two charging mechanisms that would tax foreign low-taxed profits from the UAE. Groups should treat that as the position under this decision rather than as a permanent policy commitment.

In June 2026 the Ministry of Finance announced that the OECD had published the UAE’s DMTT on its Central Record of Legislation with Transitional Qualified Status, and that the UAE DMTT has also qualified for the OECD Pillar Two safe harbor. The Ministry’s own statement of the effect is that other jurisdictions will recognize the top-up tax due in the UAE, so top-up calculations do not have to be performed elsewhere for UAE in-scope entities. That status is what stops the same profit being taxed twice under another country’s rules.

Groups should also track Ministerial Decision No. 96 of 2026, which adopts the OECD consolidated commentary and administrative guidance for the purposes of Cabinet Decision 142 of 2024. It is published on the Ministry of Finance website and is the instrument that keeps the UAE rules aligned with OECD interpretation as that interpretation changes.

Frequently Asked Questions

Does the UAE DMTT apply to my company?

Only if your company is a constituent entity of a multinational group whose ultimate parent reported consolidated revenue of EUR 750 million or more in at least two of the four fiscal years before the year being tested. UAE-only businesses, owner-managed companies and free zone startups are outside it regardless of profitability. If you are unsure, the test is applied to the parent’s consolidated accounts, not to your UAE numbers.

When did the UAE top-up tax take effect?

Cabinet Decision No. 142 of 2024 took effect on 1 January 2025 and applies to fiscal years beginning on or after that date. A group with a 31 December year end was first in scope for the year ended 31 December 2025. A group with a 30 June year end was first in scope for the year beginning 1 July 2025.

Is the DMTT a 15% tax on profit?

No. It is the difference between 15% and the group’s UAE effective tax rate, applied to excess profit rather than to total profit. Excess profit is net Pillar Two income after deducting the substance-based income exclusion. A group with a 9% effective rate pays 6 percentage points on excess profit, not 15% on everything.

Does the DMTT end the 0% free zone rate?

Not in law. A qualifying free zone person keeps the 0% rate on qualifying income. But because the effective tax rate is calculated across all UAE constituent entities of the group combined, a large 0% profit pulls the blended rate below 15% and triggers a top-up for in-scope groups. For everyone else the free zone regime is unaffected.

What is the substance-based income exclusion worth in 2026?

For a fiscal year beginning in 2026 it removes 9.4% of eligible UAE payroll costs plus 7.4% of the carrying value of eligible UAE tangible assets from the tax base. Both rates decline each year to a permanent 5% from 2033. Claiming it is optional and the election is made annually.

When is the first UAE top-up tax return due?

The return is due 15 months after the fiscal year end, or 18 months where that year is the group’s first transition year. For a 31 December 2025 year end the transition-year extension gives a due date of 30 June 2027, and the tax is payable on that same date in UAE dirhams.

Can a group in scope owe no DMTT at all?

Yes, in three situations: the UAE effective tax rate is already 15% or more; the de minimis election applies because average UAE revenue is under EUR 10 million and average UAE income under EUR 1 million; or the transitional country-by-country safe harbor is met, most often because UAE profit before tax is no greater than the substance-based income exclusion amount.

Who is liable if the top-up tax is not paid?

All UAE constituent entities of the domestic main group and domestic minority-owned subgroup are jointly and severally liable for the full amount, under Article 12. Where the paying entity is not a legal person, partners and beneficiaries are jointly and severally liable to the extent of their ownership interests. Liability is not confined to the entity that earned the profit.

Do in-scope groups still file a normal corporate tax return?

Yes. The DMTT is an additional obligation with its own registration, return and payment. Ordinary corporate tax registration, bookkeeping and audit requirements, transfer pricing documentation and return filing all continue. Corporate tax paid feeds into the adjusted covered taxes used to compute the effective tax rate.

Are there penalties for getting the first DMTT return wrong?

For fiscal years beginning on or before 31 December 2026, and not ending after 30 June 2028, no penalties apply to the filing of the top-up tax return or the Pillar Two information return where the FTA considers that the group took reasonable measures to apply the rules correctly. The relief covers good-faith error in a genuinely filed return, not non-filing, and it does not waive the tax.

Official Sources

Information is current as of August 2026. Limitations are stated rather than smoothed over. Every article number, threshold, rate and deadline above is taken from the text of Cabinet Decision No. 142 of 2024 as published by the Federal Tax Authority, which was retrieved and read in full for this article. The Ministry of Finance website was unreachable from our network during this review, so the OECD transitional qualified status announcement was read from an archived copy of the Ministry’s own page rather than the live page, and the text of Ministerial Decision No. 96 of 2026 was not read directly. No FTA registration deadline is quoted here, because Article 13.1 leaves the timeline to be prescribed by the Authority and no dated deadline had been published on the FTA legislation pages at the time of writing. The worked example is an illustration built from the decision’s own formulas, not a case from practice. This article explains published rules and is not tax or legal advice. In-scope groups should confirm their position with the Federal Tax Authority or a registered tax agent before registering or filing.