UAE Amends the Corporate Tax Law to cater for Pillar Two

The United Arab Emirates (UAE) issued Federal Decree Law No. (60) of 2023, amending specific sections of Federal Decree Law No. (47) Of 2022 on the Taxation of Corporations and Businesses (CT Law). These changes pave the way for the future introduction of domestic minimum taxes.

 The key amendments entail: 

1. Definitions: Addition of new terms in the CT Law, including the definition of "top-up tax," which serves as an extra tax applied to Multinational Enterprises (MNEs) to ensure they maintain an effective tax rate of 15%, aligning with the Pillar Two rules. Additionally, an "MNE" is now defined as an entity or a group with a presence in multiple countries.

2. Tax Rate: A forthcoming decision will outline the mechanisms, terms, conditions, rules, and procedures for imposing the top-up tax on MNEs in accordance with the Pillar Two rules.

Effective Date: The rules for the top-up tax will become operational upon the release and publication of the Minister's upcoming decision in the Official Gazette.

While the new legislation may not contain substantive changes, it signifies the authorities' efforts to prepare for the smooth implementation of the Pillar Two rules once they take effect. Public consultation is anticipated to occur in Q1 2024, and the implementation of Pillar Two is scheduled for a period after 2024.