Background

The global tax landscape has seen significant changes in recent years, particularly with the implementation of the Global Anti-Base Erosion (GloBE) Rules under the OECD/G20 BEPS 2.0 initiative's Pillar Two framework. These rules aim to ensure that multinational enterprises (MNEs) pay a minimum level of tax on income from their global operations, thereby reducing opportunities for tax avoidance and base erosion. This initiative is part of a broader effort to create a fairer and more transparent international tax system.

The UAE has been actively aligning its tax policies with international standards to foster a transparent and robust economic environment. In this context, the UAE Ministry of Finance (MoF) announced the introduction of the Domestic Minimum Top-Up Tax (DMTT) on MNEs, effective from January 1, 2025, through Cabinet Decision No. 142 of 2024.

To further these efforts, the MoF issued Ministerial Decision No. 88 of 2025, effective from January 1, 2025, adopting all OECD guidance on the GloBE Rules as part of its local tax regulatory framework. This decision ensures that the UAE's DMTT framework is consistent with international standards, reflecting the UAE's commitment to implementing best practices in taxation and minimizing compliance burdens for MNEs operating within its jurisdiction.

Key Highlights

Ministerial Decision No. 88 of 2025 mandates the adoption of the Commentary and Agreed Administrative Guidance as outlined in six OECD documents. Key insights from these documents include:

I. Tax Challenges Arising from the Digitalisation of the Economy – Consolidated Commentary to the Global Anti-Base Erosion Model Rules (2023):

This document consolidates all commentary on the GloBE Model Rules, providing comprehensive explanations, clarifications, and examples to ensure consistent interpretation and application of the rules. It includes detailed discussions on the objectives of the rules, the meaning of specific terms, and practical scenarios illustrating their application. It incorporates administrative guidance released by the Inclusive Framework from March 2022 to December 2023, promoting consistent and coordinated interpretation for MNEs and tax administrations.

II. Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global Anti-Base Erosion Model Rules (June 2024)

This document offers detailed administrative guidance on implementing the GloBE Rules, covering various aspects such as the calculation of the effective tax rate, the treatment of deferred tax liabilities, and the allocation of profits and taxes involving flow-through entities and securitization vehicles. It addresses common questions and provides updates on any changes or new interpretations, including practical instructions, examples, and clarifications to help MNEs and tax administrations comply with the GloBE Rules.

III. Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global Anti-Base Erosion Model Rules – Central Record

This document serves as a central repository for all administrative guidance related to the GloBE Rules, consolidating updates and clarifications issued by the OECD to ensure stakeholders have access to the most current information. It acts as a comprehensive reference document for the consistent application of the GloBE Rules.

IV. Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on Article 8.1.4 and 8.1.5 of the Global Anti-Base Erosion Model Rules (January 2025)

This guidance specifically addresses Articles 8.1.4 and 8.1.5 of the GloBE Rules, providing comprehensive explanations, practical examples, and clarifications to facilitate understanding and compliance with these provisions. Article 8.1.4 pertains to the treatment of deferred tax assets and liabilities, ensuring their proper inclusion in the calculation of the effective tax rate. Article 8.1.5 focuses on the allocation of profits and taxes involving flow-through entities and securitization vehicles, offering detailed instructions on the treatment of these entities under the GloBE Rules.

V. Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on Article 9.1 of the Global Anti-Base Erosion Model Rules

This document provides guidance on Article 9.1 of the GloBE Rules, offering comprehensive explanations, practical examples, and clarifications to facilitate understanding and compliance with its requirements. Article 9.1 focuses on the treatment of specific tax attributes and their impact on the calculation of the effective tax rate.

VI. Tax Challenges Arising from the Digitalisation of the Economy – GloBE Information Return (January 2025)

This publication outlines the standardized format of the information return to facilitate compliance with and administration of the GloBE Rules. The GloBE Information Return (GIR) includes detailed instructions on the data that MNEs must report to tax administrations to ensure transparency and consistency in the application of the GloBE Rules. It incorporates clarifications on completing the GIR, reflecting updates from administrative guidance related to Pillar Two compliances. Additionally, it provides a template for notifying jurisdictions about the exchange of the GIR through information-sharing mechanisms. This guidance is essential for tax administrations and MNEs to achieve coordinated and predictable tax outcomes, promoting fairness and reducing opportunities for tax avoidance.

Concluding Thoughts

Ministerial Decision No. 88 of 2025 ensures that the UAE's Pillar Two tax framework aligns with the OECD's GloBE Rules, promoting consistency and minimizing interpretative discrepancies. By adopting the OECD's comprehensive guidance and commentary, the UAE has facilitated the consistent application and interpretation of the Pillar Two Framework within its jurisdiction, in line with global standards.