UAE Introduces 15% Minimum Tax for Multinationals in 2024

December 16, 2024

Background

As of January 1, 2024, the United Arab Emirates (UAE) will implement a 15% minimum tax to tax the profits of large multinationals generated locally. This amendment intends to align with the OECD’s global tax rules, Pillar Two, and will significantly affect the Transfer Pricing management. 

Pillar Two and Its Effects on the UAE

The OECD’s Pillar Two establishes a global minimum tax to ensure that multinationals pay fair taxation in each jurisdiction, which in turn aims to hinder and/or prevent tax evasion. This framework applies to companies with revenues exceeding €750 million, which directly affects the tax structure of transactions in the UAE. 

Transfer Pricing Implications

  1. Review of Tax Strategies: Multinationals must assess the tax implications of their intercompany transactions, ensuring that Transfer Pricing policies comply with international standards. 
  2. Thorough Documentation: Companies will have to support the allocation of revenues and costs in their global transactions, especially in low-tax jurisdictions, such as the UAE. 
  3. Increased Oversight: This tax could generate additional scrutiny from tax authorities, increasing the importance of maintaining transparent Transfer Pricing practices. 

Preparing for Change

Companies must proactively adapt to this new tax environment. It includes: 

  • Conducting financial effect analyses. 
  • Ensuring that their Transfer Pricing policies are at Arm’s Length rules. 
  • Getting professional advice to comply with the new requirements. 

Conclusion

Introducing the 15% minimum tax in the UAE significantly amends the global tax landscape. Multinationals must adjust their Transfer Pricing strategies to ensure compliance and mitigate risks. 

Call to Action

Need assistance in preparing your company for these tax amendments? Contact us today to ensure Transfer Pricing compliance! 

Fuente: Reuters