BEPS 2.0 GloBE Rules — How UAE Entities Should Respond

The OECD-led BEPS 2.0 Pillar Two framework introduces a global minimum effective tax rate of 15% for in-scope multinational groups. Korea began enforcing the central rule, the Income Inclusion Rule (IIR), from January 2024, and the UAE has indicated intent to implement its own minimum tax framework.

The UAE's 9% Corporate Tax remains attractive, but for groups in scope of Pillar Two, the 6 percentage point gap between 9% and 15% can result in additional top-up tax at the parent level. This guide outlines the points UAE-based teams should consider.

1. Pillar Two basics — IIR, UTPR, QDMTT

Pillar Two has three core rules, each with country-specific timing, but the broad architecture is the same:

• IIR (Income Inclusion Rule): the parent jurisdiction taxes low-taxed income of its subsidiaries. Korea began enforcement in January 2024.
• UTPR (Undertaxed Profits Rule): a backstop rule applied where the IIR does not capture top-up tax — taxed at other group jurisdictions.
• QDMTT (Qualified Domestic Minimum Top-up Tax): a domestic top-up tax that lets the source country collect first. The UAE has indicated it is reviewing its own QDMTT framework.

The headline takeaway is that "paying 9% in the UAE and stopping there" is no longer a viable end-state. The shortfall versus 15% is likely to be collected somewhere in the group structure.

2. Who is in scope

Pillar Two generally applies to MNE groups with consolidated revenue of EUR 750 million or more in at least two of the four preceding financial years. Many large Korean and global groups meet this threshold, putting their UAE subsidiaries effectively within scope when:

• The parent is a listed Korean conglomerate or part of one
• A mid-cap group operates multiple foreign subsidiaries
• A global group has its holding company in a third country (not Korea)

Scoping is determined at the group level, so UAE-based finance teams should confirm with the parent's tax function whether the group is in scope.

3. The gap between UAE 9% and the global 15%

If the UAE subsidiary belongs to an in-scope group, paying just 9% in the UAE is no longer the end of the story. The parent jurisdiction can collect a top-up tax through the IIR, lifting the group's effective rate.

Closing this gap is not just a rate question — it is a structural question that depends on the business model. Even maintaining 0% under QFZP status can heighten Pillar Two top-up exposure, so chasing the lowest local rate is no longer always optimal.

4. Documentation UAE subsidiaries should prepare

Pillar Two compliance goes beyond a single return — it requires the GloBE Information Return (GIR) and a master file/local file structure that reconciles consistently. Items the UAE subsidiary should prepare include:

1. GloBE Income/Loss — UAE statutory P&L adjusted to GloBE bases
2. Covered Taxes — UAE Corporate Tax, withholding taxes, and other items in scope of the global minimum tax calculation
3. Substance-Based Income Exclusion (SBIE) — payroll and tangible asset carve-outs
4. Related party transaction documentation — transfer pricing master file and local file
5. Group structure and ownership chain — full ownership flow up to the ultimate parent

5. Aligning with the parent group

Pillar Two is not a rule that the parent and subsidiary can address separately. The GIR prepared at the parent level must reconcile to the UAE subsidiary's data, with the following points pre-aligned:

Financial year and reporting currency

The parent's reporting currency drives the GIR figures. The UAE entity closes in AED, but its results must be translated into the parent's reporting currency for consolidation.

Transfer pricing consistency

Pricing across UAE subsidiary, parent, and other group entities must reconcile to the parent's master file. Differences in unit pricing, margin, or cost-sharing methodology can trigger adjustments on both sides.

Closing Thoughts

BEPS 2.0 Pillar Two is more than a new filing — it reshapes how multinational groups design their global tax position. The UAE 9% rate remains attractive, but groups in scope cannot assess UAE structures in isolation.

The information above is general in nature. Applicability depends on group revenue, financial year, and parent jurisdiction. We recommend a tailored review aligned with your parent group's tax function.