The United Arab Emirates will impose a new tax on multinational companies and large conglomerates in the country as part of changes to corporate tax laws.

Large multinational companies will pay a minimum tax rate of 15 percent on profits generated in the country, effective for fiscal years beginning on or after Jan. 1, 2025, the country’s finance ministry announced Monday.

The domestic minimum additional tax (DMTT) will apply to MNEs with consolidated worldwide revenues of €750 million. euros or more in at least two of the four financial years immediately preceding the financial year in which the tax is applicable.

This “strategic step reflects the UAE’s commitment to implement the two-pillar solution of the Organization for Economic Co-operation and Development (OECD), aiming to create a fair and transparent tax system aligned with global standards,” it said.

The OECD’s two-pillar reform program established a global minimum corporate tax to ensure that large multinationals pay at least 15 percent tax on profits in each country where they operate.

According to the OECD, the initiative aims to address the tax challenges arising from the digitization and globalization of the economy and to set a minimum level for tax competition. The proposed global minimum tax is expected to result in an annual global gain of about $220 billion, or 9 percent of global corporate income tax revenue, the OECD said last year.

At the same time, tax incentives are planned for research and development (R&D) activities as well as for jobs with high added value

Bahrain also announced in September that it will also apply the DMTT from January 1, 2025, to large multinationals.

Our country announced this new system that applies a global minimum level of taxation in January, as it is mandatory from 1/1/2024 by the EU member states. Therefore, both multinational business groups and large-scale domestic groups with an annual turnover of more than 750 million euros must be taxed with a minimum effective tax rate that cannot be less than 15%.