1. Why did the UAE implement Global Minimum Tax (Pillar 2)?
To protect its tax base. If UAE didn’t tax MNEs at 15%, the country of the Ultimate Parent Entity (UPE) would collect that tax via the Income Inclusion Rule (IIR). By introducing a Qualifying Domestic Minimum Top-up Tax (QDMTT), the UAE ensures the tax stays within the Emirates.

2. Who exactly is an “MNE Group” under these rules?
It’s any group with entities (including branches or PEs) in more than one jurisdiction. If you have a UAE HQ and just one branch abroad, you are an MNE.

3. What is the revenue threshold for applicability?
€750 million. If your consolidated revenue exceeded this in two of the last four fiscal years, you are in scope for 2025.

4. My turnover will drop below €750M in 2025. Am I safe?
No. The test is historical. If you met the threshold in the past (e.g., 2023 and 2024), you are covered for 2025 regardless of current performance.

5. Which major economies are not implementing Pillar 2 yet?
Surprisingly, the US, India, and China have not implemented Pillar 2.

6. Is this just for “Tax” people?
Pillar 2 is driven by IFRS and Consolidated Financial Statements.

7. Does Pillar 2 follow standard UAE Corporate Tax deductions?
No. You cannot apply standard CT deductions or computations here. Pillar 2 starts with your financial books, making only specific adjustments defined by the GloBE rules.

8. What counts as “Covered Taxes” for the 15% calculation?
It includes Corporate Income Tax (CIT), Withholding Taxes, and Zakat (in Saudi Arabia). It explicitly excludes indirect taxes like VAT, Excise, and Stamp Duty.

9. How are Deferred Taxes treated?
Deferred tax is included in the “Covered Taxes” calculation, but with a catch: there is a recapture mechanism if the tax isn’t paid within five years.

10. Is Country-by-Country Reporting (CbCR) data sufficient for Pillar 2?
No. While helpful, CbCR data is not enough. The data points required for Pillar 2 compliance are significantly more detailed and “way beyond” CbCR filings.

11. Are Joint Ventures (JVs) part of the MNE Group?
Generally, no. JVs are often treated as separate MNE groups if they are not fully consolidated. They have their own complex guidance (hundreds of pages!) under OECD rules.

12. How are “Government Entities” treated?
They are excluded entities.

13. What is the status of UAE’s Pillar 2 framework?
As of September 2025, the OECD confirmed UAE’s regime is a Qualifying Domestic Minimum Top-up Tax (QDMTT).

14. What is the benefit of UAE having “Qualifying” status?
It means any Top-up Tax paid in the UAE is fully creditable against IIR liabilities abroad. You won’t pay double tax; the UAE payment “switches off” the liability at the parent level.

15. Does this apply to Free Zone entities?
Yes. If the MNE Group is in scope, Free Zone entities are covered. The 0% rate in a Free Zone will likely trigger the Top-up Tax to reach the 15% minimum.

16. Are International Shipping companies covered?
International shipping is currently excluded from Pillar 2 rules.

17. Are Airlines excluded like shipping?
No. AIrlines are currently in scope and do not enjoy the shipping exclusion.

18. What is the “Permanent Safe Harbor”?
You are exempt from detailed calculations if:
1. Revenue in the jurisdiction is < €10M.
2. AND Income is < €1M (or a loss).

19. What are the “Transitional Safe Harbors” (First 5 Years)?
To ease implementation (until 2030), you can use simplified tests based on CbCR data:
1. De Minimis test.
2. Simplified ETR test (is effective tax > 15-17%?).
3. Routine Profit test.

20. What is the “Initial Phase of International Activity” exclusion?
A beneficial UAE-specific provision. It allows an MNE to ignore Top-up Tax for 5 years if:
1. They operate in 6 or fewer jurisdictions.
2. Tangible assets outside the reference jurisdiction are < €50M.

21. Can a UAE Group with a BVI Parent use the “Initial Phase” exclusion?
Yes. Since BVI has not implemented the Income Inclusion Rule (IIR), the UAE subsidiary can claim this exclusion (provided they meet the jurisdiction/asset cap).

22. Can a UAE Group with an Isle of Man Parent use the exclusion?
No. Isle of Man has implemented IIR. Therefore, the condition is failed, and the exclusion cannot be claimed.

23. What is the “Unintended Consequence” for UAE-headquartered MNEs?
If a UAE-based MNE doesn’t meet the “Initial Phase” exclusion criteria (e.g., has >6 countries), it must pay 15% Top-up Tax to the UAE even if no other country (like the US/India) would have collected it. The UAE effectively taxes its own MNEs higher than required by international pressure.

24. I have a “Paper Company” in BVI but 99% ops in UAE. Am I an MNE?
Technically, yes. You have entities in two jurisdictions.

25. How can such “Paper MNEs” avoid Pillar 2?
Redomicile the foreign entity to the UAE before 2025. If all entities are in the UAE, you are no longer a “Multinational” Group and fall out of scope

26. What is the Subject to Tax Rule (STTR)?
It’s a treaty-based rule applying a 9% minimum withholding tax on certain related-party payments.

27. What is the priority of tax collection?
1. Withholding Taxes/STTR (Source).
2. QDMTT (Domestic – UAE priority).
3. IIR (Parent Level).
4. UTPR (Backstop if IIR fails).

28. When does the first filing happen?
For the first year (FY 2025), you have 18 months after the year-end to file. Subsequent years will have a 15-month deadline.

29. If the filing is in 18 months, why worry now?
Because you need to set up the data collection systems now. The financial statements for 2025 are the basis for the tax. You cannot retrofit the data tags later easily.

30. What is the one piece of advice for Finance Heads today?
Assess now. Determine if you are an MNE. Check if you qualify for a Safe Harbor. If not, start compiling data beyond CbCR immediately.