The global minimum tax is changing how companies in the UAE are valued, structured, and sold, with the transaction itself potentially bringing businesses into the tax regime, according to a new report by Dhruva, a Ryan LLC affiliate.
The latest Deals Decoded publication identifies four points at which a transaction can change a group’s tax position and outlines steps buyers and sellers should take before completing a deal.
Known internationally as Pillar Two, the global minimum tax was agreed by more than 140 countries and jurisdictions through the Organization for Economic Co-operation and Development. It requires the largest international groups to pay at least 15% tax on profits earned in every country where they operate.
Any shortfall, known as a top-up tax, becomes payable. The UAE adopted the rules through Cabinet Decision No. 142 of 2024, effective for financial years beginning on or after January 1, 2025. The UAE collects the shortfall on domestic profits locally rather than allowing it to be collected abroad.
The rules apply to groups with worldwide revenue of at least EUR 750 million, approximately USD 860 million, in two of the previous four years.
The first is scale. When two groups combine, their revenues are assessed together. For example, a buyer with EUR 500 million in revenue acquiring a business with EUR 300 million enters the regime on completion, even though neither company approached the threshold on its own.
“The threshold test is where most boards are caught out,” said Nimish Goel, Leader, Middle East Dhruva, a Ryan LLC Affiliate.
The second factor is timing. Tax is calculated annually on a country-wide basis and is not divided when ownership transfers. Completing on the first day of a financial year removes this issue.
Third, UAE companies within a group are assessed together, meaning a target cannot be evaluated in isolation.
The fourth factor is the acquisition premium. Part of the premium paid above accounting value is ordinarily written off over time, but global minimum tax rules largely disregard these write-offs, leaving taxable profit higher than expected.
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The report said the allowance for genuine operations, based on employment costs and physical assets, declines annually. It falls from 9.6% and 7.6% in 2025 to 9.4% and 7.4% in 2026, reaching 5% each by 2033.
A transitional simplification ends for financial years beginning on or after January 1, 2027.
Dhruva also said ownership structure matters for sovereign wealth funds and private equity investors. Government bodies fall outside the rules, but this status does not automatically extend to companies they own.
Dhruva recommends that buyers test the combined revenue threshold early, while sellers should prepare tax records for inspection. Both sides should also review insurance coverage and clearly define tax responsibilities in transaction contracts.