UAE Top-up Tax Scope: Article 1 of Decision 142 of 2024

Article 1 - Scope of Application

Article 1.1. Scope of this Decision

1.1.1 This Decision shall apply to Constituent Entities that are members of an MNE Group that has annual revenue of EUR 750 million or more in the Consolidated Financial Statements of the Ultimate Parent Entity in at least two of the four Fiscal Years immediately preceding the tested Fiscal Year. Further rules are set out in Article 6.1 which modify the application of the consolidated revenue threshold in certain cases.

1.1.2 If one or more of the Fiscal Years of the MNE Group taken into account for purposes of Article 1.1.1 is of a period other than 12 months, for each of those Fiscal Years the EUR 750 million threshold is adjusted proportionally to correspond with the length of the relevant Fiscal Year.

Article 1.2. MNE Group and Group

1.2.1 An MNE Group means any Group that includes at least one Entity or Permanent Establishment that is not located in the Jurisdiction in which the Ultimate Parent Entity of the MNE Group is located.

1.2.2 A Group means a collection of Entities that are related through ownership or control such that the assets, liabilities, income, expenses and cash flows of those Entities:

(a) are included in the Consolidated Financial Statements of the Ultimate Parent Entity; or

(b) are excluded from the Consolidated Financial Statements of the Ultimate Parent Entity solely on size or materiality grounds, or on the grounds that the Entity is held for sale.

1.2.3 A Group also means an Entity that is located in one Jurisdiction and has one or more Permanent Establishments located in other Jurisdictions provided that the Entity is not a part of another Group described in Article 1.2.2.

Article 1.3. Constituent Entity

1.3.1 A Constituent Entity is any of the following:

(a) any Entity that is included in a Group; or

(b) any Permanent Establishment of a Main Entity that is within paragraph (a).

1.3.2 A Permanent Establishment that is a Constituent Entity under paragraph (b) above shall be treated as separate from the Main Entity and any other Permanent Establishment of that Main Entity.

1.3.3 A Constituent Entity does not include an Entity that is an Excluded Entity.

Article 1.4. Ultimate Parent Entity

1.4.1 Ultimate Parent Entity means either:

(a) an Entity that:

i. owns directly or indirectly a Controlling Interest in any other Entity; and

ii. is not owned, with a Controlling Interest, directly or indirectly by another Entity; or

(b) the Main Entity of a Group that is within Article 1.2.3.

Article 1.5. Excluded Entity

1.5.1 An Excluded Entity is an Entity that is:

(a) a Governmental Entity;

(b) an International Organisation;

(d) a Pension Fund;

(e) an Investment Fund that is an Ultimate Parent Entity; or

(f) a Real Estate Investment Vehicle that is an Ultimate Parent Entity.

1.5.2 An Excluded Entity is also an Entity:

(a) where at least 95% of the value of the Entity is owned (directly or through a chain of Excluded Entities) by one or more Excluded Entities referred to in Article 1.5.1 (other than a Pension Services Entity) and where that Entity:

i. operates exclusively or almost exclusively to hold assets or invest funds for the benefit of the Excluded Entity or Entities; and/or

ii. only carries out activities that are ancillary to those carried out by the Excluded Entity or Entities.

(b) where at least 85% of the value of the Entity is owned (directly or through a chain of Excluded Entities), by one or more Excluded Entities referred to in Article 1.5.1 (other than a Pension Services Entity) provided that substantially all of the Entity’s income is Excluded Dividends or Excluded Equity Gain or Loss that is excluded from the computation of Pillar Two Income or Loss in accordance with Articles 3.2.1(b) or (c).

1.5.3 A Filing Constituent Entity may elect not to treat an Entity as an Excluded Entity under Articles 1.5.2 and 1.9. An election under this Article is a Five-Year Election.

Article 1.6 Sovereign Wealth Funds

1.6.1 Notwithstanding Article 1.4, a sovereign wealth fund that meets the definition of a Governmental Entity is not an Ultimate Parent Entity.

1.6.2 Where the sovereign wealth fund described in Article 1.6.1 holds a direct Controlling Interest in an Entity, such Entity will be considered as the Ultimate Parent Entity of a Group provided that it:

(a) owns directly or indirectly a Controlling Interest in another Entity, or

(b) is a Main Entity located in one Jurisdiction with one or more Permanent Establishments located in other Jurisdictions provided that the Main Entity is not a part of another Group described in Articles 1.2.2 or 1.6.2(a).

1.6.3 For the purposes of Article 1.6.2 and notwithstanding Article 1.2.2., a Group means the Ultimate Parent Entity referred to in Article 1.6.2 and:

(a) the Entities and Permanent Establishments referred to in Article 1.6.2(a)or (b) ; and

(b) the Entities that would have been excluded solely on size, materiality grounds or on the grounds that the Entity is held for sale if the Ultimate Parent Entity referred to in Article 1.6.2 would have been required to prepare Consolidated Financial Statements.

Article 1.7. Permanent Establishments of Excluded Entities

1.7.1 Where a Main Entity is an Excluded Entity in accordance with Article 1.5.1, its Permanent Establishments will also be treated as Excluded Entities.

1.7.2 For purposes of Article 1.5.2, the activities undertaken by the Permanent Establishments of a Main Entity shall be considered for purposes of determining whether the Main Entity meets the requirements in subparagraphs (i) and/or (ii) of Article 1.5.2(a), or Article 1.5.2(b). Where the requirements are met, the Permanent Establishments of the Main Entity will also be considered as Excluded Entities in accordance with Article 1.5.2.

Article 1.8 Excluded Entity held by an Investment Fund or a Real Estate Investment Vehicle that is not a Group Entity

1.8.1 For purposes of Article 1.5.2, the condition that requires a GrFoup Entity to be owned (directly or through a chain of Excluded Entities) by one or more Excluded Entities referred to in Article 1.5.1 is deemed to be met where the first-mentioned Entity is held by an Investment Fund or a Real Estate Investment Vehicle that is not a Group Entity.

Article 1.9. Entities held by Non-profit Organisations

1.9.1 An Entity will be treated as an Excluded Entity provided that the following conditions are met:

(a) 100% of its value is owned directly or indirectly by one or more Non-profit Organisations;

(b) the aggregate revenue of the Group of which the Entity is a member is less than EUR 750 million if the revenue of the Non-profit Organisations and Excluded Entities under Article 1.5.2 were ignored; and

(c) the revenue of the Entity and all other Entities that are not Non-Profit Organizations and are not Excluded Entities under Article 1.5.2 is less than 25% of the revenue of the MNE Group.

1.9.2 Where the Fiscal Year of the MNE Group is a period other than 12 months, the computation under Article 1.9.1(b) shall be adjusted in accordance with Article 1.1.2.