Compliance
UAE’s Pillar Two Reporting: What Multinational Entities Need to Know
As the UAE enforces Pillar Two rules for multinational entities (MNEs), this article breaks down the recent decision, its scope, and how MNEs should prepare for compliance.
By NomadicTax Research Team • 5-8 min read • September 12, 2026
## What Is Pillar Two and Why It Matters now in the UAE
Pillar Two, under the OECD’s Inclusive Framework, sets a **global minimum tax rate** and establishes rules to ensure that large MNEs pay a minimum level of tax in every jurisdiction they operate in. In the UAE, these rules are enforced via the **Top-Up Tax**, introduced under Cabinet Decision No. 142 of 2024. A recent UAE policy — Ministerial Decision No. 133 of 2026 — clarifies which entities must file a “Pillar Two Information Return.” ([mof.gov.ae](https://mof.gov.ae/en/financial-legislation/?utm_source=openai))
## Key Highlights of Decision 133/2026
From **financial years starting on or after January 1, 2025**, entities in the UAE must submit Pillar Two information if they are:
- a constituent entity located in the UAE, excluding investment entities;
- a joint venture or project joint venture; or
- a hybrid reverse-upper-tier entity as defined under UAE law.
Reporting can be done **directly** by the entity, or via a **designated UAE entity on behalf of eligible non-UAE members**. ([mof.gov.ae](https://mof.gov.ae/ar/news/ministry-of-finance-issues-ministerial-decision-on-requirements-for-filing-pillar-two-information-return/?utm_source=openai))
## Examples
- A software firm headquartered in UAE with subsidiaries globally must file if its global group meets the minimum thresholds.
- A UAE-based joint venture co‐owned by foreign companies would also be required under Decision 133.
- An investment fund structured as an investment entity is **excluded**, even if part of a multinational group.
## Action Steps for Multinational Entities in the UAE
1. **Assess your group structure**
Determine if your entity is a constituent entity, joint venture, hybrid entity, or investment entity under UAE legislation.
2. **Review financial year timing**
If your fiscal year started on or after 1 January 2025, Decision 133 applies. If earlier, check transitional provisions or exemptions.
3. **Establish reporting processes**
Identify which entity can prepare and submit the Information Return; ensure data collection across jurisdictions, especially related to effective tax rate and APAs.
4. **Align with documentation requirements**
Make sure you have properly documented the income, expenses, taxes paid, and intercompany transactions to support the figures (e.g. GloBE calculations).
5. **Consult advice if hybrid or reverse hybrid involved**
Identifying hybrid features can be legally complex; professional tax planning may be necessary.
## Why This Matters Strategically
- Increases **tax transparency** and aligns the UAE with global minimum tax norms.
- Imposes **non-compliance risks** such as penalties or reputational damage for MNEs failing to file correctly.
- Provides certainty around Top-Up Tax exposure and reduces surprises in global effective tax rate calculations.
## Tips for Global Tax Teams
- Coordinate with finance, legal and compliance units across jurisdictions.
- Use tax software tools capable of Pillar Two calculation and reporting.
- Monitor updates: UAE may issue additional guidance or clarifications, especially on thresholds or reverse hybrid definitions.
**Conclusion**: Pillar Two is reshaping international tax obligations. UAE’s Ministerial Decision No. 133 of 2026 clarifies who must file a Pillar Two information return and sets rules effective from January 1, 2025. Entities must quickly assess their status and align operations to ensure compliance.