DMTT and Pillar Two: the global minimum tax in the UAE

OECD Framework

The OECD's Pillar Two, finalized in 2021, establishes a 15% global minimum tax on the profits of large multinational groups. There are three main mechanisms:

• Income Inclusion Rule (IIR) — the ultimate parent entity taxes the profits of its under-taxed foreign subsidiaries.
• Undertaxed Profits Rule (UTPR) — a backstop rule that applies if the IIR is not enforced.
• Qualifying Domestic Minimum Top-up Tax (QDMTT) — the State of the subsidiary itself collects the local top-up to reach 15%.

Transposition in the UAE: the DMTT

The UAE implemented the QDMTT through Cabinet Decision No. 142 of 2024, applicable to financial years beginning on or after January 1, 2025. Any top-up is determined from the jurisdictional GloBE effective tax rate after covered-tax adjustments and the substance-based income exclusion.

Scope of Application

The DMTT applies to UAE entities that are members of a multinational group whose consolidated turnover equals or exceeds EUR 750 million in at least two of the four most recent closed financial years (Cabinet Decision No. 142 of 2024). The threshold is assessed at the consolidated group level, not on an entity-by-entity basis.

UAE entities within an in-scope group require analysis under the GloBE rules. QFZP status does not itself exempt an entity, but the top-up is not obtained by mechanically subtracting a nominal 0% or 9% rate from 15%.

Calculating the Top-up

The DMTT is calculated under the OECD's GloBE Rules:

1. Determination of the entity's GloBE income (IFRS accounting profit, as adjusted).
2. Determination of the GloBE tax (covered taxes actually paid).
3. Calculation of the effective tax rate (ETR) = GloBE tax / GloBE income.
4. If the ETR is below 15%, a top-up to 15% is collected through the DMTT.

Interaction with Standard Corporate Tax

The DMTT is calculated after the federal Corporate Tax. If the entity already pays Corporate Tax (9% mainland without QFZP status, or QFZP with non-qualifying income), that amount is included in the GloBE tax and reduces the DMTT top-up accordingly.

The ordinary UAE 9% rate does not rule out DMTT. For an in-scope group, the computation uses the effective tax rate of the relevant UAE entities, based on GloBE income and adjusted covered taxes, rather than merely the rate in another jurisdiction. Top-up tax is calculated on excess profit after the substance-based income exclusion, with applicable adjustments and safe harbours. A QFZP’s nominal 0% rate therefore does not automatically produce a top-up equal to 15% of all its accounting profit.

Substance-Based Income Exclusion (SBIE)

The SBIE mechanism allows a portion of income tied to the entity's physical substance (payroll and tangible assets) to be excluded from the GloBE calculation. For fiscal years beginning in 2025, the carve-out is 9.6% of payroll and 7.6% of tangible assets, declining gradually to 5% / 5% from 2033 (art. 9.2 of the OECD GloBE Model Rules).

Reporting Obligations

• A dedicated DMTT return to be filed with the FTA within 15 months of the close of the financial year (18 months for the first year of application, in line with the GloBE Rules).
• Information return: MD 133/2026 governs information filing obligations and the circumstances in which a filing by the ultimate parent or a designated foreign entity, with the required exchange arrangements, allows local relief. Foreign filing is not an automatic local exemption. Check notifications, the filing entity and the exchange conditions for the relevant year.
• DMTT registration: FTA Decision 12/2026 provides a seven-month deadline following the fiscal year end in the cases it covers, and a transitional deadline of 30 November 2026 for years ending before 30 April 2026. Check each entity category, domestic designation and deregistration separately; ordinary CT registration does not replace this analysis.
• Detailed documentation of the GloBE adjustments.

Practical Implications

• Mid-sized French groups (turnover below EUR 750m) are not affected and retain the 0% QFZP benefit.
• Large French groups from the CAC 40 or SBF 120 with operations in Dubai, by contrast, are directly impacted.
• For the latter, QFZP status loses some of its appeal and tax planning must be reassessed.
• Family offices structuring significant stakes in global groups should check whether consolidation triggers the threshold.