UAE groups with foreign income, owners or customers need to manage treaty relief, residency, permanent establishment risk and transfer pricing. Multinationals with global revenue of at least EUR 750 million in two of the last four years also pay a 15% Domestic Minimum Top-up Tax for financial years from 1 January 2025.
Who pays the UAE Domestic Minimum Top-up Tax?
UAE entities of multinational groups with consolidated revenue of at least EUR 750 million in at least two of the four preceding years, for financial years starting on or after 1 January 2025. The top-up brings the UAE effective tax rate to 15%, and the return and payment are due 15 months after the period end, 18 months for the first transition year (PwC on Cabinet Decision No. 142 of 2024).
How do treaties reduce tax for UAE businesses?
By cutting or removing foreign withholding tax on dividends, interest, royalties and service fees, and by deciding which country taxes business profits. Relief usually needs a UAE tax residency certificate and evidence that the UAE company has real substance (Crowe UAE). Where the UAE law conflicts with a treaty, the treaty prevails.
When does a foreign company create a UAE permanent establishment?
When it has a fixed place of business in the UAE or a person here habitually concluding contracts on its behalf. A permanent establishment brings the profits attributable to it into UAE corporate tax at 9% above AED 375,000 (Cabinet Decision No. 116 of 2022). The same risk runs the other way for UAE companies with staff abroad.
Do economic substance rules still apply?
Not for financial years starting on or after 1 January 2023. Cabinet Decision No. 98 of 2024 ended the Economic Substance Regulations from then, and penalties for later periods are being cancelled. Years from 2019 to 2022 remain subject to the old rules (PwC on Cabinet Decision No. 98 of 2024). Substance still matters for treaty access and free zone qualification.
Frequently asked questions
Does the UAE charge withholding tax?
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The corporate tax law sets withholding tax at 0%, so the practical issue is usually foreign withholding on payments made to UAE companies.
Do I still file an ESR report?
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Not for financial years starting on or after 1 January 2023.
Is Pillar Two relevant to a mid-size group?
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Only if group revenue reaches EUR 750 million in two of the last four years.
Sources
- UAE implements Pillar Two: Domestic Minimum Top-up Tax (Cabinet Decision No. 142 of 2024) — PwC Middle East. Checked 17 October 2026.
- UAE tax residency rules and their interaction with tax treaties (Cabinet Decision No. 85 of 2022) — Crowe UAE. Checked 17 October 2026.
- Cabinet Decision No. 98 of 2024 amending the UAE Economic Substance Regulations — PwC Middle East. Checked 17 October 2026.
- Cabinet Decision No. 116 of 2022 on the annual Taxable Income subject to Corporate Tax (AED 375,000) — UAE Ministry of Finance. Checked 16 October 2026.
- UAE Federal Corporate Tax Law: new advancements (Federal Decree-Law No. 47 of 2022) — Mayer Brown. Checked 17 October 2026.