Website Last updated:

May 15, 2026

Article 5 provides the fundamental formulas for calculating the Jurisdictional Effective Tax Rate (ETR) and the resulting Top-up Tax. It introduces the Substance-based Income Exclusion (SBIE), which reduces excess profit based on payroll costs and tangible asset values. The article outlines how Top-up Tax is allocated among Constituent Entities and defines the 'de minimis' exclusion for groups with low revenue and income in the UAE. It also treats minority-owned entities as separate subgroups for ETR purposes, ensuring precise calculation of the global minimum tax impact within the UAE jurisdiction.

Article 5 - Computation of Effective Tax Rate and Top-up Tax

Article 5.1. Determination of Effective Tax Rate

5.1.1 The Effective Tax Rate of the MNE Group with Net Pillar Two Income shall be calculated for each Fiscal Year. The Effective Tax Rate of the MNE Group is equal to the sum of the Adjusted Covered Taxes of each Constituent Entity located in the UAE divided by the Net Pillar Two Income of the UAE for the Fiscal Year. For purposes of Article 5, each Stateless Constituent Entity subject to the provisions of this Decision shall be treated as if it was a single Constituent Entity located in the UAE.

5.1.2 The Net Pillar Two Income of the UAE for a Fiscal Year is the positive amount, if any, computed in accordance with the following formula:

Net Pillar Two Income = Pillar Two Income of all Constituent Entities - Pillar Two losses of all Constituent Entities

Where:

(a) the Pillar Two Income of all Constituent Entities is the sum of the Pillar Two Income of all Constituent Entities located in the UAE determined in accordance with Article 3 for the Fiscal Year; and

(b) the Pillar Two Losses of all Constituent Entities is the sum of the Pillar Two Losses of all Constituent Entities located in the UAE determined in accordance with Article 3 for the Fiscal Year.

5.1.3 Adjusted Covered Taxes and Pillar Two Income or Loss of Constituent Entities that are Investment Entities are excluded from the determination of the Effective Tax Rate in Article 5.1.1 and the determination of Net Pillar Two Income in Article 5.1.2.

Article 5.2. Top-up Tax

5.2.1 The Top-up Tax Percentage for a Fiscal Year shall be the positive percentage point difference, if any, computed in accordance with the following formula:

Top up Tax Percentage = Minimum Rate - Effective Tax Rate

Where the Effective Tax Rate is the Effective Tax Rate determined in accordance with Article 5.1 for the Fiscal Year.

5.2.2 The Excess Profit for the Fiscal Year is the positive amount, if any, computed in accordance with the following formula:

Excess Profit = Net Pillar Two Income − Substance based Income Exclusion

Where:

(a) The Net Pillar Two Income is the Net Pillar Two Income of the UAE determined under Article 5.1.2 for the Fiscal Year; and