UAE Domestic Minimum Top-Up Tax (DMTT)

What MNCs & UAE Family Businesses Must Do in 2025

Understanding the UAE DMTT

The Domestic Minimum Top-up Tax (DMTT), effective in the UAE from 1 January 2025, aligns the UAE with the OECD’s Pillar Two global minimum tax rules, mandating a 15% effective tax rate on UAE profits for in-scope large multinational enterprise (MNE) groups.

An MNE group is in-scope for DMTT if

The consolidated revenue of the group exceeds EUR 750 million (~AED 3 billion) in at least two of the four preceding financial years, and
The group operates across borders (i.e., has subsidiaries, branches, or operations in at least one jurisdiction outside the UAE).

The DMTT ensures that income earned in the UAE is subject to a minimum effective tax rate of 15%, preserving the UAE’s taxing rights and preventing foreign jurisdictions from imposing additional top-up taxes on UAE-sourced profits under Pillar Two’s Income Inclusion Rule (IIR) or Undertaxed Profits Rule (UTPR).

Context within UAE Corporate Tax

Standard UAE Corporate Tax (CT) is 9% (0% for qualifying Free Zone income).
The DMTT bridges the gap to 15% where the group’s UAE effective tax rate (ETR) on a jurisdictional basis is below 15%.
Free Zone entities within in-scope groups will no longer maintain a 0% effective rate; DMTT will apply to top up to 15%.

Technical Implications for UAE Family Business Groups

If group has any foreign operation & revenue over EUR 750 million, it qualifies as an MNE group under the UAE’s DMTT framework.
If the group is entirely domestic (no foreign entities), current UAE rules do not impose DMTT, but any future cross-border activity could trigger in-scope status.

Jurisdictional ETR Calculation

ETR = Covered Taxes / GloBE Income for all UAE constituent entities aggregated at the jurisdictional level.
Covered Taxes include UAE corporate tax paid and other qualifying taxes aligned with Pillar Two definitions.
If the computed ETR is below 15%, a top-up tax applies to bring the effective rate to 15%.

Impact on Free Zone Entities

Free Zone entities contributing profit but paying 0% will dilute the jurisdictional ETR, resulting in top-up tax obligations despite their exempt status under standard CT rules.

Impact on Listed Entities

Profits of listed subsidiaries are fully included in the DMTT computation at 100%, irrespective of minority public shareholding, impacting reported post-tax profits.

Preparing for DMTT: Strategic Considerations

Implementation Timeline

Effective Date: Financial years starting on or after 1 January 2025.
First DMTT return due 18 months after year-end for the initial year (e.g., 30 June 2027 for a 31 December 2025 year-end).
Subsequent years will follow a 15-month filing deadline.

Data and Systems Readiness

Groups will require high-quality IFRS-based financial reporting for each constituent entity to prepare for Pillar Two calculations.
ERP and consolidation systems should be aligned to capture necessary data for GloBE Information Returns and to compute Covered Taxes accurately.

Transitional Safe Harbors

The UAE DMTT incorporates OECD Transitional CbCR Safe Harbors for FY 2025 and 2026, allowing simplified ETR testing and potential deferral of top-up tax where applicable.
Groups should assess eligibility for:

1. De Minimis Test

2. Simplified ETR Test

3. Routine Profit Test to manage early-year exposure.

Planning Considerations

Evaluate existing group structures for MNE status and explore legitimate restructuring if appropriate, considering the UAE’s General Anti-Abuse Rule (GAAR).
Assess the impact on dividend policies and cash flow planning due to deferred payment timelines but increased tax liabilities.
Identify opportunities to maximise “Covered Taxes” to reduce potential top-up liability where feasible under Pillar Two rules.

How Stratify Consulting Can Assist

Stratify Consulting partners with UAE family-owned groups to ensure seamless DMTT readiness and compliance, providing:

DMTT readiness assessments using pro forma ETR simulations across all UAE constituent entities.
Mapping of MNE structures and revenue threshold validation.
Analysis and implementation of transitional safe harbor strategies.
Assistance with FTA registration and preparation for DMTT and GloBE Information Returns.
Strategic advisory on restructuring considerations aligned with family governance, succession planning, and long-term tax efficiency.

Next Steps: Strategic Readiness for 2025

The DMTT is not merely a compliance obligation but a critical strategic planning requirement for large UAE family-owned groups operating internationally. Proactive engagement will:

Avoid last-minute disruptions.
Facilitate effective cash flow management for the impending top-up tax obligations.
Protect your group’s operations and reputation while aligning with global tax standards.

To discuss a tailored DMTT readiness plan for your group, please contact Stratify Consulting to schedule a private technical briefing and planning session.