Two regimes, not one
Most UAE finance teams have internalized the 9% Corporate Tax. Far fewer have internalized that, for large multinational groups, 9% stopped being the whole story in 2025. The OECD Pillar Two-aligned Domestic Minimum Top-up Tax (DMTT) adds a second regime with its own scope, its own effective date, and its own data demands — and a group that configured S/4HANA for “9% CT” in 2023 has not, by doing so, configured it for the DMTT. This article covers both, precisely.
The 9% regime, precisely
The UAE Ministry of Finance introduced a federal Corporate Tax effective for financial years starting on or after 1 June 2023, with a standard statutory rate of 9% and a 0% rate for taxable profits up to AED 375,000 to support small businesses and start-ups.
For genuinely small businesses there is a further relief: resident taxable persons can claim Small Business Relief where revenue in the relevant and previous tax periods is below AED 3 million (Ministerial Decision No. 73 of 2023) — a relief that applies to tax periods from 1 June 2023 and ends on or before 31 December 2026, and is not available to members of multinational groups.
Transfer pricing came with the regime: UAE CT applies the arm’s length principle to related-party and connected-person transactions, per the Federal Tax Authority’s Transfer Pricing Guide. (We state this at a general level; the FTA guide’s exact wording should be confirmed against the source document.)
The 15% DMTT: the regime large groups missed
From financial years starting on or after 1 January 2025, the UAE applies a Domestic Minimum Top-up Tax closely aligned with the OECD GloBE Model Rules. Scope is defined by group size, not local profitability: it applies to constituent entities of multinational enterprises operating in the UAE with annual global revenues of EUR 750 million or more in the consolidated financial statements of the ultimate parent entity in at least two of the four preceding financial years. Its effect, per EY’s analysis of the implementing legislation: a top-up tax on low-taxed UAE entities ensuring a minimum effective tax rate of 15% — implemented through Cabinet Decision No. 142 of 2024, released 11 February 2025.
The practical consequence: a UAE subsidiary of a large multinational cannot answer “what is our UAE tax position?” from its own books alone. DMTT scope turns on the group’s consolidated revenue, and the effective-tax-rate computation draws on GloBE-defined data that spans entities. That is an ERP data problem as much as a tax-technical one.
What this asks of your S/4HANA landscape
Four workstreams, in the order most programs should run them. A labeling note first: where a statement below is standard SAP configuration practice rather than an SAP-documented product fact, we say so explicitly — that distinction matters when your auditor asks.
1. Legal entity structure. In S/4HANA, the company code is the smallest organizational unit of external accounting for which a complete, self-contained set of accounts can be created — including balance sheet and profit and loss statements for legal individual financial statements. Company codes can be separate legal entities, and legal entities are mapped to company codes. Since UAE CT attaches to taxable persons, the clean starting point is one company code per UAE taxable entity, with the mapping documented — untangling entities that share a company code after the fact is the expensive version.
2. Tax codes and calculation. Reflecting a new CT regime typically means defining the relevant tax codes within the tax calculation procedure and assigning them to the affected company codes. This is standard configuration practice — the specific design (which codes, which condition types, how the 0% band and reliefs are handled) is design work for your tax and finance teams, not an out-of-the-box SAP behavior, and we deliberately do not present it as one.
3. Transfer pricing data. The arm’s length requirement is only as auditable as the data behind it. Capturing intercompany transactions, related-party master data, and pricing support at document and master-data level in S/4HANA — so TP documentation can be produced rather than reconstructed — is, again, standard practice and design work rather than a packaged product feature.
4. Reporting, including for the DMTT. SAP Analytics Cloud can serve as the reporting and analytics layer on top of S/4HANA financial data for CT and DMTT monitoring — entity-level taxable positions, group-scope indicators, effective-tax-rate inputs. We frame SAC here generically as an analytics layer (standard practice); scope any DMTT-specific reporting design against the GloBE data points your group’s Pillar Two advisers specify.
A sequencing note for 2026
Groups inside DMTT scope are already in their first covered financial years. If your S/4HANA landscape was configured for the 9% regime in 2023 and untouched since, the gap analysis to run now is data availability for the top-up computation — entity mapping, intercompany completeness, and where the GloBE inputs will come from — before the first DMTT filings make the gaps visible the hard way.
The 9% rate was the easy part. The UAE’s corporate tax reality in 2026 is two regimes with different scopes running through the same ledgers — and the groups that treat it as a data-architecture question, not a rate change, are the ones that will file without heroics.