“Finance”: The classification strengthens its position as a leading global business and investment hub
The Ministry of Finance has announced that the Organisation for Economic Co-operation and Development (OECD) has classified the minimum local complementary tax in the United Arab Emirates (DMTT) as part of the “Central Register of Legislation with Qualified Transitional Status,” which is available on its website.
The ministry stated that the UAE’s commitment to international tax standards, along with the OECD’s praise for the country’s tax system, enhances its status as a prominent global center for business and investment, supporting its strategic agenda for sustainable development.
It emphasized that this new classification will improve clarity for multinational corporations regarding the minimum local complementary tax, as this system ensures that no foreign taxes are levied on the profits of subsidiaries operating within the country. Additionally, other jurisdictions will recognize the obligations of the complementary tax owed in the UAE for these entities. This development aims to reduce the risks associated with cross-border audits and the complexities and costs tied to tax disputes.
Importantly, the minimum local complementary tax is now qualified to benefit from the safe harbor mechanism under Pillar Two of the OECD framework, alleviating the administrative burden for multinational corporations and tax authorities alike, by exempting entities in the UAE from having to perform complementary tax calculations in other countries.
The announcement of this qualified transitional status is a significant step in providing greater transparency and clarity for multinational firms operating in the UAE.
All decisions from the Council of Ministers and ministerial resolutions related to the minimum local complementary tax can be accessed on the Ministry of Finance’s official website.