UAE’s New Tax Incentives to Boost Innovation and Attract Global HQs
Dubai: Technology companies are set to benefit from the UAE’s new tax refund scheme aimed at encouraging ‘high-value’ employment activities, but the incentive extends beyond the tech sector. According to consultants, businesses across various industries—whether UAE-based or foreign subsidiaries—stand to gain from this tax break, which would cover a portion of employment costs, including the salaries of CEOs and senior management involved in core business functions contributing significantly to the UAE economy.
“This is one of the first tax incentives globally designed to foster innovation and creativity,” said Girish Chand, Senior Partner at MCA Consultants. However, he noted the need for further clarification, as similar incentives in other countries typically target strategic sectors with high-value investments, job creation, sustainable development, and export-driven industries.
Who qualifies as ‘high-value’?
Although the proposal is still in development, the Ministry of Finance is expected to quickly finalize the details, and once implemented, the initiative could encourage numerous global businesses to establish their headquarters in the UAE. For existing businesses, it offers a valuable assurance of generous tax relief.
James Swallow, Commercial Director at Sovereign PPG, compared this initiative to Saudi Arabia’s efforts to attract regional headquarters, highlighting the UAE’s aim to solidify its position as a leading global business hub and offer a competitive tax environment for companies looking to relocate.
As the global tax landscape undergoes significant shifts, with Western nations raising taxes on corporations and high-net-worth individuals, Gulf states, including the UAE, are introducing corporate taxes while also offering opportunities for tax breaks. This approach is further evidenced by the recent relocation of global headquarters, such as those of Fairmont and Veon, to Dubai.
Corporate Tax Changes: 15% for Multinationals
On December 9, the UAE Ministry of Finance announced major updates to the country’s corporate tax system, including the introduction of a 15% domestic minimum top-up tax for multinational companies with global revenues exceeding 750 million euros for two out of the last four financial years. This tax will take effect starting January 1, 2025.
The move to implement a 15% corporate tax for multinationals is in line with global efforts under the Pillar 2 rules, which aim to impose a minimum tax rate on companies with operations spanning multiple countries. Nilesh Ashar, Senior Managing Director at FTI Consulting, pointed out that UAE businesses had anticipated these changes, given previous discussions about implementing the Global Minimum Tax (GMT) rules.
As the GMT rules take effect in several countries, including the EU, UK, and Turkey, businesses with multinational operations must assess the potential impacts of these rules and consider whether they qualify for reliefs under the new regulations. While these rules are complex and introduce additional compliance requirements, they are designed to eliminate the opportunity for companies to avoid taxes by being headquartered in low-tax jurisdictions.
