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Transitional CbCR safe harbour

Applies
FY2025 onwards
Reviewed
Rule
UAE-CT-DMTT-CBCR-2025.1
By

How does the UAE DMTT transitional CbCR safe harbour work?

UAE top-up tax is nil if CbC revenue is under EUR 10 million and profit under EUR 1 million, the ETR is 17% or more, or profit is within the SBIE.

Per Cabinet Decision No. 142 of 2024, Article 8.2.1 of the attached Legislation, Transitional CBCR Safe Harbour

During the Transition Period, at the election of the Filing Constituent Entity and notwithstanding Article 5, the Jurisdictional Top-up Tax of the UAE is deemed to be zero for a Fiscal Year if any one of three tests is met: the MNE Group reports Total Revenue below the published de minimis threshold and Profit before Income Tax below its own published threshold in the UAE on its Qualified CbC Report; or it has a Simplified Effective Tax Rate in the UAE at or above the Transition Rate for that Fiscal Year; or its Profit before Income Tax in the UAE is not above the Substance-based Income Exclusion for the entities reported in the UAE. Article 8.2.1.4 disapplies the safe harbour in five cases.

A deemed nil that displaces the whole Article 5 computation — but only within the Transition Period, only on an election, and only where none of the five disapplying cases bites. One of those five is permanent in effect: a Group that did not benefit in a previous Fiscal Year in which it was subject to the Pillar Two Rules cannot come back in.

Three alternative tests, and five ways out of them

8.2.1.1 — any one of these is enough

  • (a) Total Revenue below the published de minimis threshold AND Profit (Loss) before Income Tax below its own published threshold, in the UAE on the Qualified CbC Report — both limbs, not either
  • (b) A Simplified Effective Tax Rate in the UAE at or above the Transition Rate for the Fiscal Year
  • (c) Profit (Loss) before Income Tax in the UAE not above the Substance-based Income Exclusion, as calculated under Articles 5.3 and 9.2, for entities reported in the UAE in the Country-by-Country Report

The de minimis test is two conditions

Test (a) needs both the revenue limb and the profit limb. A result reporting "the de minimis test" without saying which limb failed leaves a reader unable to check it, so the rule names the limb.

The Transition Rate moves by Fiscal Year

Article 8.2.1's definition sets a different rate for each year of the Transition Period. A rule holding one rate would be right for one year and silently wrong for the next, which is what the rate table's per-year rows exist for.

The election is not automatic

Article 8.2.1.1 applies "at the election of the Filing Constituent Entity". Meeting a test makes the safe harbour available; it does not apply it. Reporting a deemed nil without the election would tell a reader they owe nothing when they have not yet claimed it.

8.2.1.4 — five cases in which it does not apply at all

  • (a) The UAE is the UPE Jurisdiction and the Ultimate Parent Entity is a Flow-through Entity, unless all Ownership Interests in it are held by Qualified Persons
  • (b) The Top-up Tax that may arise from Stateless Reverse Hybrid Entities subject to the Decision
  • (c) A Multi-parented MNE Group where a single Qualified CbC Report does not include the information of the combined groups
  • (d) The Constituent Entities did not benefit from this safe harbour, or an equivalent foreign provision, in a previous Fiscal Year in which the Group was subject to the Pillar Two Rules — unless the Group had no UAE Constituent Entities that year
  • (e) The MNE Group uses data from different sources of Qualified Financial Statements for the same Entity or Permanent Establishment in these calculations

Case (d) is the one that is easy to miss

It is a once-out-always-out rule. A Group that stops using the safe harbour in a year it was subject to the Pillar Two Rules cannot elect it again later.

8.2.1.3 and 8.2.1.7 — the adjustments, which are not encoded

Clause 8.2.1.3 lists eight adjustments to the figures used, and 8.2.1.7 restricts which payroll and tangible assets count for test (c). Both are stated here and left to the reader, who supplies the adjusted figures.

Adjustments the figures must already reflect

  • Article 8.2.1.3: the Qualified CbC Report figures adjusted as the Decision requires — including removing a net unrealised fair value loss above EUR 50 million and the uncertain tax positions, and the treatment of hybrid arbitrage arrangements
  • Article 8.2.1.6: the de minimis test does not apply where UAE Entities held for sale and not consolidated line by line, added to Total Revenue, reach EUR 10 million
  • Article 8.2.1.7: the routine profits test's carve-out excludes payroll and tangible assets of Entities not reported in the UAE in the CbC Report, Excluded Entities, and Entities located elsewhere

The Transition Period and Rate — Article 8.2.1.11

  • Fiscal Years that begin before 1 January 2027 and end before 1 July 2028
  • Transition Rate: 16% for Fiscal Years beginning in 2025, 17% for those beginning in 2026

Order of testing

  1. 1

    Inputs requiring your determination

    Any input a person must decide and has not decided stops the computation. The figures are asked for only where the safe harbour can be reached at all.

  2. 2

    The Transition Period

    Tested first. Outside the period the safe harbour is not available and no test is computed, because none could be elected.

  3. 3

    Cases in which the safe harbour does not apply

    Article 8.2.1.4. Where one applies, the three tests are not computed and the Top-up Tax falls to be computed under Article 5.

  4. 4

    The three tests in Article 8.2.1.1

    Any one suffices. Where none is met the result says which limb of the de minimis test failed and why each of the others did. Where one is met, the result depends on whether the election has been made.

Examples

Illustrative scenarios — ours, not the authority’s — each computed live by this rule. Change any fact and the outcome is the rule’s, not a hand-written answer.

A small UAE footprint, both de minimis limbs met, elected

An in-scope group whose UAE Total Revenue and Profit before Income Tax are both below the published thresholds on its Qualified CbC Report, with the election made.

Computed

The Jurisdictional Top-up Tax of the UAE is deemed to be zero for the Fiscal Year as computed: Article 8.2.1.1 so provides, notwithstanding Article 5, during the Transition Period and at the election of the Filing Constituent Entity, which you have indicated has been made. The test satisfied: Article 8.2.1.1(a) — the de minimis test, both limbs of it. Only one of the three is needed. Based on the figures you supplied.

Workings

Total Revenue in the UAEArticle 8.2.1.1(a) — as supplied
EUR 6,000,000
De minimis revenue thresholdArticle 8.2.1.1(a) — published value for FY2026. Revenue is below it
EUR 10,000,000
Profit (Loss) before Income Tax in the UAEArticle 8.2.1.1(a) and (c) — as supplied
EUR 400,000
De minimis profit thresholdArticle 8.2.1.1(a) — published value for FY2026. Profit is below it
EUR 1,000,000

Decided by the three tests in article 8.2.1.1

Revenue below, profit above — the de minimis test fails

The same group with UAE profit above the profit threshold, so test (a) is not met on its profit limb, and no other test is supported by the figures supplied.

Computed

The Transitional CBCR Safe Harbour is not met as computed: Article 8.2.1.1 deems the Jurisdictional Top-up Tax of the UAE to be zero if any one of its three tests is satisfied, and none is on the figures you supplied. The de minimis test in (a) requires both a revenue limb and a profit limb and its profit limb is not met; no Simplified Effective Tax Rate was supplied for the test in (b); and no Substance-based Income Exclusion was supplied for the test in (c). The Top-up Tax falls to be computed under Article 5, and the Simplified Calculations Safe Harbour in Article 8.2.2 is a separate election.

Workings

Total Revenue in the UAEArticle 8.2.1.1(a) — as supplied
EUR 6,000,000
De minimis revenue thresholdArticle 8.2.1.1(a) — published value for FY2026. Revenue is below it
EUR 10,000,000
Profit (Loss) before Income Tax in the UAEArticle 8.2.1.1(a) and (c) — as supplied
EUR 3,000,000
De minimis profit thresholdArticle 8.2.1.1(a) — published value for FY2026. Profit is not below it
EUR 1,000,000

Decided by the three tests in article 8.2.1.1

A Simplified Effective Tax Rate at the Transition Rate

A larger UAE operation that fails the de minimis test but whose Simplified Effective Tax Rate is at or above the Transition Rate for the year.

Computed

The Jurisdictional Top-up Tax of the UAE is deemed to be zero for the Fiscal Year as computed: Article 8.2.1.1 so provides, notwithstanding Article 5, during the Transition Period and at the election of the Filing Constituent Entity, which you have indicated has been made. The test satisfied: Article 8.2.1.1(b) — the Simplified Effective Tax Rate is not below the Transition Rate. Only one of the three is needed. Based on the figures you supplied.

Workings

Total Revenue in the UAEArticle 8.2.1.1(a) — as supplied
EUR 90,000,000
De minimis revenue thresholdArticle 8.2.1.1(a) — published value for FY2026. Revenue is not below it
EUR 10,000,000
Profit (Loss) before Income Tax in the UAEArticle 8.2.1.1(a) and (c) — as supplied
EUR 12,000,000
De minimis profit thresholdArticle 8.2.1.1(a) — published value for FY2026. Profit is not below it
EUR 1,000,000
Simplified Effective Tax RateArticle 8.2.1.1(b) — as supplied
18%
Transition RateArticle 8.2.1.1(b) — published value for FY2026, which varies by Fiscal Year
17%

Decided by the three tests in article 8.2.1.1

Profit within the substance exclusion

A capital-intensive UAE operation whose Profit before Income Tax does not exceed the Substance-based Income Exclusion for the entities reported in the UAE.

Computed

The Jurisdictional Top-up Tax of the UAE is deemed to be zero for the Fiscal Year as computed: Article 8.2.1.1 so provides, notwithstanding Article 5, during the Transition Period and at the election of the Filing Constituent Entity, which you have indicated has been made. The test satisfied: Article 8.2.1.1(c) — Profit before Income Tax is not above the Substance-based Income Exclusion. Only one of the three is needed. Based on the figures you supplied.

Workings

Total Revenue in the UAEArticle 8.2.1.1(a) — as supplied
EUR 90,000,000
De minimis revenue thresholdArticle 8.2.1.1(a) — published value for FY2026. Revenue is not below it
EUR 10,000,000
Profit (Loss) before Income Tax in the UAEArticle 8.2.1.1(a) and (c) — as supplied
EUR 4,000,000
De minimis profit thresholdArticle 8.2.1.1(a) — published value for FY2026. Profit is not below it
EUR 1,000,000
Simplified Effective Tax RateArticle 8.2.1.1(b) — as supplied
6%
Transition RateArticle 8.2.1.1(b) — published value for FY2026, which varies by Fiscal Year
17%
Substance-based Income ExclusionArticle 8.2.1.1(c), per Articles 5.3, 9.2 and 8.2.1.7 — as supplied
EUR 5,000,000

Decided by the three tests in article 8.2.1.1

A test met, but no election made

The de minimis figures are met and the Filing Constituent Entity has not elected the safe harbour.

Computed

The Transitional CBCR Safe Harbour is available but has not been elected as computed. The test satisfied: Article 8.2.1.1(a) — the de minimis test, both limbs of it. Article 8.2.1.1 applies at the election of the Filing Constituent Entity, so meeting a test makes the safe harbour available rather than applying it — until the election is made the Top-up Tax falls to be computed under Article 5. Based on the figures you supplied.

Workings

Total Revenue in the UAEArticle 8.2.1.1(a) — as supplied
EUR 6,000,000
De minimis revenue thresholdArticle 8.2.1.1(a) — published value for FY2026. Revenue is below it
EUR 10,000,000
Profit (Loss) before Income Tax in the UAEArticle 8.2.1.1(a) and (c) — as supplied
EUR 400,000
De minimis profit thresholdArticle 8.2.1.1(a) — published value for FY2026. Profit is below it
EUR 1,000,000

Decided by the three tests in article 8.2.1.1

Out in an earlier year, so out for good

A group that did not benefit from the safe harbour in a previous Fiscal Year in which it was subject to the Pillar Two Rules, and did have UAE Constituent Entities that year.

Computed

The Transitional CBCR Safe Harbour is not available as computed: Article 8.2.1.4(d) — the Constituent Entities did not benefit from this safe harbour, or an equivalent foreign provision, in a previous Fiscal Year in which the Group was subject to the Pillar Two Rules, and the Group did have Constituent Entities in the UAE that year. Once out, a Group cannot come back in. Article 8.2.1.4 disapplies Article 8.2.1.1 in that case, so the three tests are not computed. The Top-up Tax falls to be computed under Article 5.

Decided by the cases in which the safe harbour does not apply

A Fiscal Year outside the Transition Period

A year beyond the Transition Period, for which the safe harbour cannot be elected at all.

Computed

The Transitional CBCR Safe Harbour is not available as computed: Article 8.2.1.1 applies during the Transition Period, and you have indicated this Fiscal Year falls outside it. No test is computed, because none could be elected. The Simplified Calculations Safe Harbour in Article 8.2.2 is a separate election and is not encoded here.

Decided by the transition period

Try it

Supply the facts and this rule computes the outcome in your browser, live. Leave a determination undecided and it blocks the result — it is never read as a no.

Not computed yet

2 inputs still need your determination:

  • Does the Fiscal Year fall within the Transition Period — does it begin before 1 January 2027 AND end before 1 July 2028 (Article 8.2.1.11(m))? A calendar-year group qualifies for 2025 and 2026 only.
  • Does any of the Article 8.2.1.4 cases apply, which would make the safe harbour unavailable — including whether the Constituent Entities failed to benefit from it in a previous Fiscal Year in which the Group was subject to the Pillar Two Rules?

Computed in your browser from the figures you supply. Nothing is sent anywhere, and the result is a computation against a rule — reference, not tax advice.

Thresholds

uae.dmtt_cbcr_de_minimis_revenue
EUR 10,000,000 · reviewed 2026-09-28 · source
uae.dmtt_cbcr_de_minimis_profit
EUR 1,000,000 · reviewed 2026-09-28 · source
uae.dmtt_cbcr_transition_rate
17% · reviewed 2026-09-28 · source

Threshold values are published separately from the rule and carried with a citation. Where none has been published for the period being computed, the rule reports that rather than applying a default.

Sources

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Reference, not tax advice.

Pankaj Agarwal — Tax Technology Leader