How does the global minimum tax (Pillar Two) affect multinational groups with entities in the UAE?

What the interviewer wants to hear

• Applies to groups with consolidated revenue of at least EUR 750 million
• Targets a 15% effective tax rate per jurisdiction
• UAE domestic minimum top-up tax from 2025
• Reduces value of 0% and 9% rates and free zone benefits for in-scope groups
• Requires data collection, ETR calculations and new filings

Model answer

Pillar Two is the OECD global minimum tax framework for large multinational groups with consolidated revenue of at least EUR 750 million. It aims to make sure each group pays an effective tax rate of at least 15% in every jurisdiction where it operates; if not, a top-up tax applies. The UAE responded by introducing a domestic minimum top-up tax for financial years starting on or after 1 January 2025, so that any top-up on UAE profits is collected in the UAE rather than by another country. For in-scope groups, the benefit of the 9% rate, the 0% band and qualifying free zone status is largely neutralised, since their UAE effective rate will be topped up to 15%. Smaller businesses are unaffected. Practically, in-scope groups need to gather detailed data, compute jurisdictional effective tax rates under the GloBE rules, plan for registrations and returns, and revisit structures that relied on low-tax outcomes.

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