UAE Consults Stakeholders On New Tax: Global Minimum Tax (GMT)

The UAE Ministry of Finance earlier announced the launch of a digital public consultation to gather the views of relevant stakeholders on the implementation of the Global Minimum Tax (GMT) or Global Anti-Base Erosion Model Rules (Pillar Two) (GloBE Rules) as well as other tax matters in the UAE. The consultation will be open from 15 March 2024 to 10 April 2024, and accessible via the Ministry’s website or the UAE’s Government Portal.

The digital public consultation reflects the Ministry’s belief in the importance of consulting with all stakeholders including the multinational groups operating in the UAE, advisors, service providers, and investors.

What is global minimum tax?

According to the MoF’s guidance paper, the global minimum tax (GMT) targets multinational enterprises (MNEs) with annual consolidated revenue of or above €750 million (nearly Dh3 billion). “Broadly, it ensures that these MNEs pay a minimum tax of 15 per cent in respect of the excess profits derived from every jurisdiction they operate through two interlocking rules, the IIR and UTPR, which are together referred to as the global anti-base erosion rules or GloBE Rules.”

Farah Mourad, senior market analyst at Equiti Group, said it serves as a universal benchmark agreed upon by countries to set a baseline for corporate taxation. It aims to ensure that MNEs contribute their fair share and maintain a level playing field. “Think of it as an international pact among nations to prevent significant disparities within the business landscape. It’s akin to establishing a minimum wage for taxes, guaranteeing that regardless of a company’s location, it plays a role in the societies it profits from.”

As of now, the MoF has launched a digital public consultation on implementing the tax in the UAE. However, the document is only for the “purpose of obtaining input from the relevant stakeholders” and does not reflect the final view of the UAE. “The information stated in this document should not be used or relied upon to make individual or business decisions, as it does not represent the final policy position of the UAE,” the document states.

The UAE will announce further details on its implementation of the tax “in due course”.

The implementation of a minimum tax for companies is already underway in some countries, particularly those that have historically operated as tax havens. For instance, countries like Ireland, Luxembourg, Switzerland, and Barbados are taking steps to adhere to the minimum tax rates. Switzerland, although known for its leniency towards multinational corporations in the past, is now making significant moves to address tax avoidance.