The United Arab Emirates published the Federal Decree-Law No. 60 of 2023 in the Official Gazette on 24 November 2023, amending specific provisions of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (CT Law) to prepare for the introduction of the BEPS 2.0 Pillar 2 Rules as part of their commitment to the OECD guidelines.

Critical Highlights for your consideration:

1.    Addition of new definitions to the CT Law

TOP-UP TAX: Tax to be imposed on Multinational Enterprises (MNEs) in accordance with the CT Law and rules to be established by the Cabinet for alignment with the OECD’s Pillar 2 Rules.

MULTINATIONAL ENTERPRISES: An entity or its members located in the UAE or a foreign jurisdiction as specified in decisions issued by the Cabinet.

2.    Addition of a new clause to the CT Law

Article (3 Clause 3): Imposition of a Top-Up-Tax and the exemptions to effectively levy tax at 15% on MNEs. A separate Cabinet Decision will set the rules, conditions, and procedures.

3.    Article 65 Revision

Revenue collected from the Corporate Tax, Top-Up Tax, and related administrative penalties will be shared between the Federal and Local Governments.

4.    Implementation and Effective Date

The Top-Up Tax shall be effective on a date specified by a separate Cabinet Decision to be issued.

RSM Comment:
We are awaiting the additional Cabinet Decisions regarding the above development to see the form and manner of implementation of Pillar 2 rules. The amendments are effective from 1st June 2023. Based on the FAQs published, it appears that these rules shall be implemented by 2025.