India Inc’s UAE sweet spot gets a tax squeeze

Dubai: The United Arab Emirates has implemented a new minimum-tax regime, prompting several major Indian multinational corporations to evaluate their tax exposure and structural viability in the country as the November registration deadline approaches, according to experts. Also Read: India, UAE step up efforts to expand rupee-dirham trade The 15% minimum tax could erode the appeal of the UAE's 9% corporate tax rate and the 0% levy on qualifying free-zone income for certain large multinational entities that fall under the scope of the regime, they noted.

The OECD's Pillar 2, or global minimum-tax rules, as enacted in the UAE in January 2025, applies to multinational groups with consolidated global revenue of at least `750 million ($871 million) over two of the last four fiscal years. This could necessitate additional tax payments when their effective tax rate dips below 15%. Tax experts indicate that numerous Indian conglomerates had been scrutinizing their exposure and data readiness since 2024, and now several are reassessing potential tax coverage, free-zone structures, and available exclusions as the deadline looms.

International tax advisor Priyanshi Chokshi reported a surge in queries from significant Indian multinational companies following the recent scope and compliance guidance issued by the UAE federal tax authority. Among them are a prominent pharmaceutical firm with a free zone presence and a multi-national enterprise operating across the UAE, India, the UK, Mauritius, and the US.

The UAE Ministry of Finance recently laid out the entities mandated to file the Pillar 2 Information Return, stating that the revenue threshold will be assessed at the group level under the UAE domestic minimum top-up tax (DMTT) regime. Consequently, a small UAE entity can fall within the rules if it constitutes part of a large Indian-led multinational entity.

Businesses qualifying under the top-up tax regime are required to register for the levy by November 30, 2025.