Top-Up Tax On Multinational Enterprises

UAE's Tax GPS for MNEs: Decoding Ministerial Decision No. 88 of 2025 🗺️

For multinational enterprises (MNEs) with a presence in the UAE, the introduction of a new top-up tax was a major development. While Cabinet Decision No. 142 of 2024 laid out the framework for the Domestic Minimum Top-Up Tax (DMTT), it was like receiving a new car without the owner's manual. We knew the vehicle was ready, but we needed the detailed instructions to operate it smoothly.

Enter Ministerial Decision No. 88 of 2025. Issued on March 28, 2025, and effective retroactively from January 1, 2025, this decision is the UAE's official owner's manual for the top-up tax. It formally adopts a series of critical documents published by the Organisation for Economic Co-operation and Development (OECD), giving MNEs and the tax authorities a clear, shared set of rules to follow.

What is the "Commentary and Agreed Administrative Guidance"?

The core of this decision is its adoption of the OECD GloBE Rules Commentary and Administrative Guidance. To put it simply:

• The GloBE Rules (Global Anti-Base Erosion) are the foundational laws for the global minimum tax.

• The Commentary is the detailed instruction manual. It explains the intent behind each rule, defines key terms, and provides examples. Think of it as the "why" and "how" of the GloBE Rules.

• The Administrative Guidance is the FAQ section. It addresses specific technical issues, ambiguities, and practical challenges that have been identified since the rules were first released. It's how the global framework adapts to real-world complexity.

By adopting these documents, the UAE is ensuring its DMTT framework is a mirror image of the global standard, which is a huge win for consistency and predictability.

The Key Documents Now Part of UAE Law

Ministerial Decision No. 88 of 2025 specifically adopts a list of six key OECD publications. Here’s what each one brings to the table:

1. The Consolidated Commentary (2024): This is the ultimate guide, consolidating all the original commentary and subsequent administrative guidance released up until the end of 2023. It provides a comprehensive reference for the core principles of the GloBE Rules.

2. Administrative Guidance (June 2024): This document offers further clarifications on specific topics, such as how to calculate the effective tax rate (ETR), handle deferred taxes, and treat flow-through entities. It’s all about ironing out the technical wrinkles.

3. Administrative Guidance – Central Record (2025): A crucial document that acts as a central repository for all administrative guidance. This ensures that MNEs and tax administrations can find the most up-to-date rules in one place, streamlining the compliance process.

4. Administrative Guidance on Articles 8.1.4 and 8.1.5 (January 2025): This is a highly specific guide focusing on the proper accounting treatment of deferred tax assets and liabilities, and the allocation of taxes and profits in complex structures.

5. Administrative Guidance on Article 9.1 (2025): This provides detailed rules on the allocation of certain tax attributes, ensuring they are properly accounted for in the ETR calculation.

6. The GloBE Information Return (GIR) (2025): This is perhaps the most practical document for MNEs. It outlines a standardized information return, simplifying the reporting process and creating a consistent format for tax data exchange between jurisdictions.

Why This Matters to Your Business

The adoption of this guidance is more than just a formality; it has tangible benefits for MNEs operating in the UAE.

• Clarity and Certainty: This decision removes ambiguity. Businesses can now rely on a globally recognized set of rules to calculate their tax liabilities, reducing the risk of unexpected tax outcomes.

• Streamlined Compliance: By using a common framework and a standardized reporting form (the GIR), the administrative burden on MNEs is significantly reduced. You won't have to reinvent the wheel for every jurisdiction.

• Global Alignment: The UAE's proactive approach to adopting these rules demonstrates its commitment to international tax cooperation. This ensures the country remains a competitive and reputable hub for global business.

Ministerial Decision No. 88 of 2025 signals a new level of maturity in the UAE's tax regime. It confirms that the country is not just implementing global tax rules, but doing so in a way that is clear, consistent, and supportive of the businesses it hosts.

Navigating the complexities of Pillar Two requires expertise. Our team at Essence is dedicated to helping you understand these new rules and ensure your business is fully prepared.

Contact us today to review your top-up tax obligations and build a robust compliance strategy.