Dubai Company Formation

Tax 3 min read

The 15% global minimum tax now has a side door, and it opened this January

A tall pale jade paper wall on a deep teal-green ground with a narrow gap cut through it near one edge, a small brass marker beside the gap

A minimum tax works by being unavoidable. On 5 January 2026 the members of the Inclusive Framework agreed a package that makes parts of it avoidable on purpose.

What the package contains

Five measures. The Side-by-Side Safe Harbour exempts groups whose ultimate parent sits in a qualified jurisdiction from the income inclusion rule and the undertaxed profits rule. The UPE Safe Harbour reduces UTPR top-up tax to zero for constituent entities in the parent’s own jurisdiction. A Simplified ETR Safe Harbour removes the detailed computation where a jurisdiction’s rate already reaches 15%. A Substance-Based Tax Incentive Safe Harbour lets certain qualified incentives count towards covered taxes. And the Transitional CbCR Safe Harbour is extended by a year.

Who walks through the door

The United States currently qualifies as having a Qualified Side-by-Side Regime. A US-headquartered group electing the safe harbour avoids IIR and UTPR liability — but remains subject to qualified domestic minimum top-up taxes in the countries where it operates. The domestic layer is the part that did not move.

When each safe harbour starts

Financial years 2024 and 2025 are unaffected. The Side-by-Side and UPE safe harbours apply to financial years beginning on or after 1 January 2026, and so does the substance-based incentive measure. The Simplified ETR Safe Harbour arrives for years beginning after 31 December 2026, though jurisdictions may allow it earlier. The extended transitional safe harbour now reaches financial years ending before 30 June 2029.

What is not finished

Each jurisdiction has to write the safe harbours into its own law, on its own timetable. Anti-arbitrage rules are still under development, further simplifications for investment entities and minority-owned entities were slated for the first half of 2026, and the OECD keeps a Central Record of Legislation naming which regimes count as qualified. A full stocktake of the minimum tax is due to conclude by 2029.

For a UAE holding structure the practical reading is narrow and specific. The safe harbours change the mechanics of the top-down rules, not the bottom-up one: a domestic minimum top-up tax is still collected where the profit arises, which is why the UAE’s own regime is unaffected by whether a parent elects the side door somewhere else. What does change is the question a group needs to answer about itself — the relevant fact is now the jurisdiction of the ultimate parent and whether it appears in the Central Record, not the group’s own effective rate. That is a different diligence question from the one asked in 2024, and it moves with a list the OECD maintains rather than with anything in the group’s accounts. The instability to watch is the word ‘qualified’. A regime is qualified because the Inclusive Framework says so, and what is granted by agreement can be withdrawn by agreement; a structure whose economics depend on one jurisdiction keeping that label is exposed to a political process, not a tax computation. Plan on the domestic layer, which is durable, and treat the side door as relief rather than as architecture.

Source: EY Tax News Update checked against the source

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