Pillar Two and Tax Evasion: How the Global Minimum Tax Changes Criminal Tax Enforcement in the UAE and Across Borders

Introduction

As the UAE Corporate Tax regime matures, the focus is moving beyond filing compliance to review, verification and, where appropriate, enforcement. For the large multinational groups operating in the UAE, an additional international layer of tax compliance now forms part of that landscape: the Pillar Two global minimum tax developed by the Organisation for Economic Co-operation and Development (“OECD”)/G20 Inclusive Framework.

Pillar Two looks beyond the statutory Corporate Tax rate in each jurisdiction. It measures the effective tax rate borne by large multinational enterprise groups on a jurisdiction-by-jurisdiction basis.

At the centre of Pillar Two are the Global Anti-Base Erosion Rules, commonly referred to as the “GloBE Rules”. Broadly, these rules are intended to ensure that in-scope multinational enterprise groups are taxed at an effective tax rate of at least 15% in each jurisdiction in which they operate.

The rules generally apply to multinational enterprise groups (“MNE Groups“) with annual consolidated revenue of at least EUR 750 million, subject to detailed threshold rules and exclusions. An in-scope group must identify its Constituent Entities, calculate its GloBE Income or Loss and Adjusted Covered Taxes in each jurisdiction, and determine its jurisdictional effective tax rate. Where that effective tax rate falls below 15%, a Top-up Tax may arise.

Collection of the Top-up Tax is coordinated through three principal mechanisms: a Qualified Domestic Minimum Top-up Tax (“QDMTT”), which generally allows the jurisdiction in which the low-taxed profits arise to collect the relevant Top-up Tax; the Income Inclusion Rule (“IIR”), which generally operates at parent-entity level; and the Undertaxed Profits Rule (“UTPR”), which serves as a backstop where the relevant Top-up Tax has not otherwise been collected.

The UAE has introduced a QDMTT through Cabinet Decision No. 142 of 2024 on the imposition of Top-up Tax on Multinational Enterprises (“Cabinet Decision No. 142 of 2024”). The QDMTT applies to Fiscal Years beginning on or after 1 January 2025. Broadly, it applies to Constituent Entities located in the UAE that are members of MNE Groups with annual consolidated revenue of at least EUR 750 million in at least two of the four Fiscal Years immediately preceding the tested Fiscal Year, subject to the detailed rules and exclusions contained in the Cabinet Decision No. 142 of 2024.

Ministerial Decision No. 96 of 2026 on the Commentary and Agreed Administrative Guidance for the Purposes of Cabinet Decision No. 142 of 2024 on the Imposition of Top-Up Tax on Multinational Enterprises (“Ministerial Decision No. 96 of 2026“), which repealed and replaced Ministerial Decision No. 88 of 2025, adopts the latest OECD Consolidated Commentary to the GloBE Rules, the OECD Agreed Administrative Guidance, and the GloBE Information Return (the “GIR”) for the purposes of applying the UAE Top-up Tax rules.

The UAE legislation defines the “Pillar Two Information Return”, as the GIR developed under the Pillar Two Implementation Framework. It contains information concerning the MNE Group’s Constituent Entities and corporate structure, the calculation of jurisdictional effective tax rates and Top-up Tax, relevant allocations and elections, and other information required for the administration of the GloBE Rules. Ministerial Decision No. 133 of 2026 on the Entities Required to File the Pillar Two Information Return for the Purposes of Cabinet Decision No. 142 of 2024 on the Imposition of Top-Up Tax on Multinational Enterprises (“Ministerial Decision No. 133 of 2026”) identifies the entities required to file the Pillar Two Information Return with the Federal Tax Authority (the “FTA”) and permits a Designated Local Entity to file on their behalf. The applicable framework also contemplates the automatic exchange of annual Pillar Two Information Returns between tax authorities where a Qualifying Competent Authority Agreement is in effect.

In addition to the GIR, in-scope UAE entities are required to file a Top-up Tax Return with the FTA, through which their UAE Top-up Tax liability is calculated and declared. Where a Domestic Designated Filing Entity is appointed under Article 2.2 of the Annexure to Cabinet Decision No. 142 of 2024, it may file the Top-up Tax Return and pay the Top-up Tax on behalf of the relevant UAE Constituent Entities. The two filings serve different functions: the GIR is primarily an information return that supports the administration of the GloBE Rules, whereas the Top-up Tax Return is the mechanism through which the UAE Top-up Tax liability is self-assessed and reported. As discussed below, that distinction may be significant in the context of criminal enforcement.

The UAE QDMTT substantially follows the structure and terminology of the GloBE Rules. It enables the UAE to impose Top-up Tax domestically on low-taxed UAE profits and, where the UAE regime satisfies the applicable qualification requirements, may give the UAE priority over foreign IIR or UTPR charging mechanisms in respect of those profits.

However, the GloBE Rules do not create a single global tax administered by a supranational enforcement authority. They provide a common international framework that participating jurisdictions implement through their respective domestic laws. Consequently, although the technical rules are internationally coordinated, the assessment, collection and enforcement of the resulting tax liabilities remain domestic matters.

This distinction lies at the centre of the criminal enforcement questions raised by Pillar Two. The regime grants tax authorities access to increasingly structured, comparable, and exchangeable information. At the same time, it subjects MNE Groups to complex calculations that are frequently performed centrally and depend on information originating from multiple entities across several jurisdictions.

Against that background, this article considers three related questions:

• Where is the line drawn? When does an incorrect GloBE or UAE Top-Up Tax position remain a matter of technical non-compliance, and when might it amount to Tax Evasion under UAE law?
• What does GIR information show about knowledge and intention? Can information reported in, or available through, the GIR be relied upon as evidence of the mens rea required for criminal Tax Evasion?
• Who may investigate and prosecute? What jurisdictional considerations arise for UAE prosecutors and courts where the relevant GloBE data, decisions or individuals are located outside the UAE?

Distinguishing Technical GloBE Non-Compliance from Tax Evasion under UAE Law

The relationship between GloBE and the UAE QDMTT is one of international methodology and domestic implementation. The GloBE Rules provide the common technical framework for determining scope, calculating GloBE Income or Loss and Adjusted Covered Taxes, measuring the jurisdictional effective tax rate, applying elections and safe harbours, and calculating any resulting Top-up Tax. The UAE has incorporated much of that methodology into domestic law through Cabinet Decision No. 142 of 2024, converting the relevant GloBE framework into an enforceable UAE Top-up Tax obligation.

The two frameworks nevertheless serve distinct functions. While the GloBE Rules provide the internationally coordinated methodology for determining the minimum level of taxation applicable to in-scope MNE Groups, UAE law governs the imposition, administration, and enforcement of the corresponding domestic obligations. Critically, the GloBE Rules do not determine whether an incorrect calculation, reporting position, or filing constitutes Tax Evasion. Rather, that question is governed by UAE domestic law, principally Federal Decree-Law No. 28 of 2022 on Tax Procedures, as amended (the “Tax Procedures Law”), and Federal Decree-Law No. 31 of 2021 Promulgating the Crimes and Penalties Law, as amended (the “Crimes and Penalties Law”).

The distinction may be expressed simply: GloBE Rules determines whether the minimum-tax position is technically correct. UAE law determines whether an incorrect position gives rise to administrative penalties, civil consequences, or, in more serious cases, criminal liability.

Technical Non-Compliance under the GloBE Rules

The GloBE Rules calculation depends on a series of complex and interconnected determinations. An MNE Group must identify its Constituent Entities, determine their location, calculate its GloBE Income or Loss and Adjusted Covered Taxes in each jurisdiction, apply the relevant elections and safe harbours, and calculate any resulting Top-up Tax.

An incorrect GloBE position may therefore result from:

1. misclassifying a Constituent Entity, Excluded Entity or Permanent Establishment, or assigning it to the wrong jurisdiction;
2. incorrectly calculating or allocating GloBE Income, GloBE Loss or Covered Taxes, Adjusted Covered Taxes or Effective Tax Rates;
3. incorrectly applying the rules governing deferred tax, tax credits, safe harbours elections incorrectly or substance- based Income Exclusions;
4. incorrectly calculating, reporting or declaring the UAE Top-up Tax liability in the Top-up Tax Return; or
5. reporting information in the GIR that is inconsistent with the underlying GloBE calculations, Top-up Tax determination or relevant domestic filings.

The existence of such errors does not, however, determine their legal characterisation. A distinction must be drawn between identifying the correct outcome under the GloBE Rules and determining the legal consequences of non-compliance under UAE law.

From a GloBE perspective, such an error means that the effective tax rate or Top-up Tax has been calculated incorrectly. The technical rules identify the correct minimum-tax outcome. Any resulting obligation to amend a filing, pay additional tax or bear an administrative penalty arises under the applicable domestic legislation.

The GloBE Rules do not themselves create a supranational criminal offence. Nor do they determine that every incorrect classification, calculation or filing constitutes Tax Evasion. The legal characterisation of the non-compliance remains a matter for the domestic law of the jurisdiction concerned.

The UAE Legal Characterisation

In the UAE, Top-up Tax is imposed under Article 3(3) of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the “Corporate Tax Law”), as amended (including by Federal Decree-Law No. 60 of 2023), and and is administered in accordance with the detailed rule set out in Cabinet Decision No. 142 of 2024. As that Decree-Law is a “Tax Law” for the purposes of the Tax Procedures Law, an incorrect QDMTT position must be considered within the procedural and enforcement framework of the Tax Procedures Law, including its provisions relating to Tax Evasion and criminal liability.

The relevant question under UAE law is not merely whether the reported Top-up Tax liability was incorrect, but how the underlying conduct should be characterised for legal and enforcement purposes.

The Tax Procedures Law defines Tax Evasion as a Person’s use of illegal means resulting in a reduction of the Due Tax, its non-payment, or a refund of Tax that the Taxpayer has no right to have refunded. The defining feature is the use of illegal means. An incorrect calculation or an interpretative disagreement should not, without further evidence, be equated with Tax Evasion.

The criminal provisions reinforce that distinction. Article 25(2) of the Tax Procedures Law penalises Tax Evasion committed through deliberate conduct, including deliberately failing to settle Payable Tax, deliberately decreasing the Due Tax and deliberately committing or omitting any other act that may constitute Tax Evasion. The penalty is imprisonment, a fine of between one and three times the evaded Tax, or both. Article 25(4) separately criminalises deliberately providing false information, data or incorrect documents to the FTA and deliberately concealing or destroying documents or information that must be kept and provided to it, with penalties of imprisonment, a fine of up to AED 1 million, or both.

Depending on the applicable provisions and the particular facts, an incorrect UAE QDMTT position may constitute:

1. a genuine disagreement concerning the interpretation of a technical GloBE or UAE QDMTT provision;
2. a calculation, data or filing error requiring correction;
3. an administrative tax violation attracting penalties; or
4. deliberate conduct involving illegal means capable of amounting to Tax Evasion.

The allocation of the burden of proof is also significant. Article 51 of the Tax Procedures Law provides that the burden of proving the accuracy of a Tax Return lies with the Taxable Person, whereas in cases of Tax Evasion the burden of proof lies with the FTA In the QDMTT context, the Top-up Tax Return is the most natural focus of both limbs: it is the return through which the UAE liability is declared, so the taxpayer must be able to support what it reports, while the FTA must prove that any understatement of that liability was achieved through illegal means.

The characterisation also matters outside the criminal context. In cases of Tax Evasion, Article 46(7) of the Tax Procedures Law permits the FTA to conduct a Tax Audit or issue a Tax Assessment within 15 years from the end of the Tax Period in which the evasion occurred, rather than within the general five-year period under Article 46(1).

Accordingly, the identification of an incorrect GloBE calculation may establish that the tax position requires adjustment. It does not, without further evidence, determine the criminal character of the conduct that produced that position. A finding that a QDMTT calculation is incorrect is therefore the beginning of any criminal analysis, not its conclusion.

The same tax outcome may have a different legal character

The complexity of the GloBE Rules means that an MNE Group may understate its UAE Top-up Tax without seeking to evade tax.

For example, a group may adopt a reasonable but ultimately unsuccessful interpretation of an Entity-classification rule, allocate Covered Taxes incorrectly because of incomplete information or differences between accounting systems, or rely in good faith on a safe harbour that is subsequently found not to apply.

Each of these circumstances may require the group to recalculate its effective tax rate, correct its filing and pay additional Top-up Tax. Administrative consequences may also arise under the applicable UAE legislation. Nevertheless, none of these circumstances, considered alone, establishes that illegal means were used or that Tax Evasion occurred.

The position may be different where the evidence indicates that information or calculations were deliberately manipulated to reduce the QDMTT liability.

Examples could include:

1. knowingly omitting an in-scope UAE Constituent Entity;
2. deliberately understating consolidated revenue, or failing to consolidate related businesses, so that the MNE Group appears to fall below the EUR 750 million threshold (conduct closely resembling that described in Article 25(2)(b) of the Tax Procedures Law);
3. fabricating or altering accounting records used to calculate GloBE Income or Covered Taxes;
4. knowingly using false information to obtain the benefit of a safe harbour; or
5. deliberately maintaining an incorrect filing position or concealing a material error after its identification.

The technical outcome may appear identical in both cases. For example, a UAE Constituent Entity may be omitted from the calculation, resulting in an understatement of Top-up Tax. However, excluding the Entity because of a genuinely held but incorrect interpretation is materially different from knowingly excluding an Entity understood to be within scope for the purpose of reducing the UAE tax liability.

The distinction therefore turns not only on whether the calculation was wrong, but also on the nature and circumstances of the conduct that produced the incorrect result.

Technical complexity does not exclude criminal liability

The complexity of the GloBE Rules explains why reasonable disagreements, data failures and computational mistakes may occur. However, that complexity does not protect deliberately false reporting.

The analysis should therefore avoid two extremes. An understated Top-up Tax amount should not be treated as potential Tax Evasion merely because the calculation is incorrect. Equally, conduct should not be regarded as non-criminal merely because it occurred within a technically complex calculation.

The nature of the technical error is relevant but not conclusive. The wider evidence must establish whether the incorrect result arose from a genuine compliance failure or conduct capable of amounting to Tax Evasion under UAE law.

The dividing line

The relationship between the GloBE framework and UAE law can therefore be understood as a two-stage process:

1. Technical stage. The UAE QDMTT rules, interpreted consistently with the applicable GloBE Commentary and Administrative Guidance adopted for UAE purposes by Ministerial Decision No. 96 of 2026, establish whether the MNE Group calculated and reported the correct amount of UAE Top-up Tax.
2. Domestic enforcement stage. If the amount was incorrect, UAE domestic law determines whether the shortfall represents a technical matter requiring correction, an administrative violation or conduct involving the illegal means required for Tax Evasion.

Pillar Two therefore does not convert every GloBE error into a criminal case. It supplies the technical benchmark; UAE domestic law determines the legal consequences of departing from it.

GIR and Top- up Tax Return Information as Evidence of Mens Rea

Before considering the evidential significance of the GIR and the Top-up Tax Return, it is important to identify the mental element that must be proved. In common law systems this is described as mens rea, meaning the “guilty mind“. UAE law refers instead to the moral element of the crime, which under Article 39 of the Crimes and Penalties Law consists of intention or error. Intention covers not only the result the perpetrator aims to produce, but also any other criminal result the perpetrator anticipated. The Tax Evasion offences in Article 25 of the Tax Procedures Law are framed around deliberate conduct, so error alone is not sufficient. The relevant question is therefore not merely whether a tax position was incorrect, but whether the taxpayer knowingly and intentionally adopted or maintained that position in reporting its UAE Top-up Tax obligations.

The introduction of the GIR and the Top-up Tax Return raises an important question for criminal tax enforcement. Can information contained in, or connected with, those filings be relied upon as evidence of the knowledge or intention required to establish Tax Evasion?

The GIR contains detailed information regarding an MNE Group’s organisational structure, Constituent Entities, jurisdictional effective tax rates, GloBE calculations, elections, safe harbours and Top-up Tax positions. The Top-up Tax Return, by contrast, is the return through which the UAE Top-up Tax liability is calculated, declared and self-assessed. Together, these filings provide FTA with a detailed picture of both the underlying Pillar Two calculations and the UAE tax position adopted by the taxpayer.

From a criminal law perspective, the significance of these filings extends beyond the calculation of Top-up Tax. They may provide insight into what information was available to the taxpayer, what risks were identified during the compliance process, and what conclusions were ultimately reached by the persons responsible for preparing, reviewing and approving the relevant tax position.

The Role of Mens Rea in Tax Evasion

A critical distinction exists between an incorrect tax position and criminal Tax Evasion. Tax Evasion generally requires more than an understatement of tax.  The FTA (and, once criminal proceedings are initiated, the Public Prosecution) must ordinarily establish that the relevant conduct involved the use of illegal means and that the taxpayer possessed the requisite knowledge or intention associated with that conduct. Consequently, the mere existence of a GloBE miscalculation, an incorrect Top-up Tax Return or an inaccurate GIR does not automatically establish criminal liability.

The central issue is therefore not simply whether the filing was incorrect, but whether the surrounding evidence demonstrates that the responsible persons knew that the position was incorrect, deliberately disregarded contrary information or intentionally maintained a position they understood to be false.

What May GIR and Top- up Tax Return Information Reveal?

Because the GIR and Top- up Tax Return requires the collection and reporting of extensive multinational tax information, it may provide insight into matters that are directly relevant to a taxpayer’s state of knowledge.

The GIR, Top- up Tax Return and its supporting documentation may reveal:

1. whether a particular Constituent Entity was identified internally as being within the scope of Pillar Two;
2. whether low-taxed profits were recognised and analysed during the compliance process;
3. whether a potential Top-up Tax exposure had already been calculated internally;
4. whether alternative tax treatments were considered and rejected;
5. whether concerns or warnings were raised by internal tax teams or external advisers; and
6. whether information disclosed to one tax authority differed materially from information disclosed elsewhere.

These matters would not in themselves prove criminal intent. However, they may assist investigators in establishing what information was available to the taxpayer at the relevant time and whether the taxpayer’s ultimate filing position was consistent with that information.

The evidential significance of the GIR, the Top-up Tax Return and supporting documentation

The importance of the GIR and the Top-up Tax Return is not limited to the filings themselves. The process of preparing those returns generates substantial supporting documentation. This may include working papers, internal memoranda, tax calculations, governance approvals, board presentations, adviser correspondence and data reconciliations. Collectively, these documents create a detailed evidential record concerning the development of the relevant tax position.

For example, internal calculations may show that a Top-up Tax liability was identified prior to filing. Correspondence may reveal that concerns were raised regarding the availability of a safe harbour. Governance papers may demonstrate that certain assumptions were specifically reviewed and approved.

Documentation may also reveal how a position reported in the GIR was translated into the Top-up Tax Return ultimately filed with the FTA.Conversely, the documentation may also show that the taxpayer undertook a genuine and robust compliance process before arriving at a position which was subsequently found to be incorrect. The same documentation may therefore support either the taxpayer’s defence or the authority’s allegations, depending on the particular facts.

Contemporaneous records are likely to play an important role in determining whether an incorrect position arose from technical complexity or potentially evasive conduct.

Relevant evidence may include:

1.   position papers addressing material GloBE judgments, including Entity classification, safe-harbour eligibility and elections;

2.   records tracing source data into the GloBE Income and Covered Taxes calculations;

3.   reconciliations between the GIR, the Top-up Tax Return and the relevant financial statements;

4.   internal review and approval records;

5.   professional advice obtained before filing;

6.   records showing when an error was discovered; and

7.   evidence of the steps taken to investigate and correct the error.

Well-maintained records may demonstrate that the group followed a genuine compliance process even where its ultimate conclusion was incorrect. Conversely, altered data, inconsistencies between the GIR and the Top-up Tax Return inconsistent internal and external calculations, ignored warnings or instructions to suppress relevant information may indicate that the issue goes beyond a technical mistake.

The absence of documentation should not, by itself, establish Tax Evasion. It may nevertheless make it more difficult for the taxpayer to explain how a material position was reached, who reviewed it and why it was maintained.

Inconsistencies and the inference of knowledge

Direct evidence of intention is seldom available in Tax Evasion cases. Consequently, investigators and courts frequently rely on circumstantial evidence when assessing the existence of mens rea.

In a Pillar Two context, inconsistencies between internal calculations, the GIR, the Top- up Tax Return, professional advice, underlying data or positions adopted across jurisdictions may be relevant in determining what the taxpayer knew at the time the filing position was taken. Similarly, evidence that relevant information was disregarded, omitted or deliberately suppressed may support an inference that the taxpayer knowingly maintained an inaccurate tax position rather than merely making a technical error.

The relationship between the GIR and the Top-up Tax Return deserves particular attention. Both are built on the same GloBE calculations, but they may be prepared by different teams and filed in different places. The GIR may be prepared by a central tax function and filed outside the UAE by the Ultimate Parent Entity or a Designated Filing Entity, reaching the FTA through exchange, while the Top-up Tax Return is filed in the UAE. A mismatch between the two is therefore both a realistic compliance risk and one of the more readily identifiable discrepancies for the FTA. The Top-up Tax Return may also be compared against the underlying GloBE calculations, internal working papers, governance records and information reported in the GIR to assess whether the UAE filing position accurately reflects the group’s Pillar Two analysis. Where a mismatch or inconsistency results from a timing difference or a breakdown in internal coordination, it is likely to remain a compliance matter. Where, however, the Top-up Tax Return declares a lower liability than the group’s own GIR data supports and the difference cannot be explained, the mismatch may support an inference that the lower figure was declared knowingly.

Information exchange and cross-border visibility

One of the principal objectives of the GIR framework is to facilitate the exchange of information between implementing jurisdictions. As Pillar Two becomes operational, tax authorities may increasingly be able to compare information reported in GIRs, Top-up Tax Returns, foreign tax returns and other disclosures made by entities within the same MNE Group. This enhanced transparency may make inconsistencies and reporting anomalies easier to identify.

The availability of both the GIR and the Top-up Tax Return may FTA with a broader evidential record than has historically been available in many international tax matters. Information reported in one filing may be compared against positions adopted in the other, as well as against foreign filings, financial statements and underlying calculations.

However, increased visibility should not be confused with proof of wrongdoing. A discrepancy may arise from a computational error, a timing difference, incomplete information or a genuine difference in interpretation. Accordingly, while an inconsistency may justify further enquiry by the FTA, it does not remove the requirement to establish the legal elements of Tax Evasion under UAE law.

The emerging importance of GIR and Top-up Tax Return information

Historically, multinational tax investigations often involved fragmented information dispersed across multiple jurisdictions, entities and systems. Pillar Two significantly changes that landscape.

The GIR and the Top-up Tax Return require MNE Groups to collect, analyse and document detailed information concerning their global tax position through a centralised compliance framework. In doing so, they may create a contemporaneous record of what was known, who possessed that information and how key decisions were made.

Taken together, the GIR, the Top-up Tax Return and the supporting documentation generated during their preparation may provide tax authorities with a detailed evidential record of both the underlying Pillar Two calculations and the UAE tax position ultimately adopted by the taxpayer.

The GIR and the Top-up Tax Return therefore occupy an important position within the Pillar Two framework.  Neither filing is, by itself, evidence of criminal intent. Nor does an inconsistency within a GIR or Top-up Tax Return automatically establish Tax Evasion. Nevertheless, the information contained in those filings, together with the documentation generated during their preparation, may become highly relevant when assessing whether an incorrect tax position arose from technical complexity, negligence, wilful blindness or deliberate conduct.

As Pillar Two becomes embedded within domestic tax systems, the GIR and the Top-up Tax Return may increasingly serve not only as compliance filings, but as important evidential sources in disputes concerning knowledge, intention and criminal liability.

Criminal Jurisdiction Considerations for UAE Prosecution / Judicial System

The cross-border nature of Pillar Two raises an important jurisdictional question. Where a UAE QDMTT liability is calculated using information, systems or decisions originating outside the UAE, which jurisdiction may investigate and prosecute the relevant conduct?

Although Pillar Two is based on an internationally coordinated framework, the UAE QDMTT remains a domestic tax obligation. Accordingly, an alleged understatement of UAE Top-up Tax remains subject to UAE law, notwithstanding that parts of the underlying calculation, decision-making process or compliance activities may have occurred outside the UAE.

Given the multinational nature of Pillar Two and the involvement of group entities, personnel, and systems across multiple jurisdictions, questions may arise regarding which country has authority to investigate or prosecute conduct relating to an allegedly incorrect Top-up Tax position. Where the relevant conduct, decisions, or reporting activities span several jurisdictions, more than one country may potentially assert jurisdiction under its domestic laws, giving rise to concurrent jurisdictional claims.

The relevant connections may include where the allegedly false information was created or submitted, where the relevant decisions were made, where the responsible persons acted and where the resulting tax loss occurred or was intended to occur. Residence alone does not necessarily determine jurisdiction. For example, an individual may reside in one country, approve a GloBE position from another and cause an understatement of UAE Top-up Tax. The UAE may have jurisdiction because the resulting loss of UAE Top-up Tax occurs in the UAE, while another country may also investigate conduct occurring within its territory.

If a UAE prosecution is pursued, the criminal proceedings would be separate from the administrative route for challenging a Tax Assessment or Administrative Penalty but would not displace the underlying tax liability: under Article 25(11) of the Tax Procedures Law, a criminal judgment does not relieve any Person of the obligation to settle Payable Tax and Administrative Penalties. Article 26(1) provides that a criminal case concerning a crime under the Tax Procedures Law or a Tax Law may be initiated only upon a written request from the FTA Director General. The matter would then proceed through the Public Prosecution and be heard by the competent criminal court.

Reconciliation remains available at each stage. Under Article 27 of the Tax Procedures Law, the FTA may reconcile Tax Evasion crimes before a criminal case is initiated, in return for full settlement of the Payable Tax and Administrative Penalties. Once a case has been initiated, the Public Prosecution may reconcile after seeking the FTA’s opinion, in return for full settlement of the tax payable and Administrative Penalties plus an additional amount equal to 50% of the evaded Tax before a conviction judgment, or 75% after one (Article 23 of Cabinet Decision No. 74 of 2023 on the Executive Regulations of Federal Decree by Law No. (28) of 2022 on Tax Procedures).

The Tax Procedures Law defines the “Competent Court” as the federal court within whose jurisdiction the FTA’s head office or one of its branches is located. That definition is used in the Law’s provisions on tax disputes, appeals and enforcement rather than in its criminal provisions. The court that hears a criminal case would therefore be determined by the general rules of criminal jurisdiction and venue, including those governing conduct occurring wholly or partly outside the UAE. Accordingly, the court with jurisdiction over a criminal Tax Evasion case may not necessarily be the same court that would hear a tax dispute or appeal arising under the Tax Procedures Law.

Cross-border calculations and domestic enforcement

Pillar Two compliance is often managed at a group level. A UAE Constituent Entity may rely on information provided by foreign group companies, calculations prepared by a Designated Filing Entity or decisions made by a central tax function located abroad.

However, the international origin of the data does not alter the fact that the resulting UAE QDMTT liability is enforced under UAE law. The primary question for UAE authorities is whether the conduct resulted in an incorrect determination, reporting or payment of UAE tax.

Identifying the responsible persons

Where a UAE QDMTT shortfall arises, responsibility may not rest solely with UAE entity itself.

The relevant inquiry may extend to:

1. who prepared the calculations;
2. who reviewed and approved the position;
3. who submitted the Top-up Tax Return and the GIR, and on whose behalf;
4. who possessed the relevant information; and
5. whether any person knowingly maintained an incorrect filing position.

This analysis may be particularly important where tax governance is centralised and key decisions are taken outside the UAE. It may also matter where a Domestic Designated Filing Entity files the Top-up Tax Return for the UAE group, since the entity that submits the return, and the individuals acting for it, may differ from the entity whose liability is understated. That may be relevant, for example, to who provided information to the FTA for the purposes of Article 25(4)(a) of the Tax Procedures Law. Under Article 25(6) of the Tax Procedures Law, any Person proven to have directly participated in, or caused, a tax crime is liable to the prescribed penalty in accordance with the rules on criminal participation in the Crimes and Penalties Law. Article 25(9) of the Tax Procedures Law, also makes participants in a Tax Evasion crime jointly and severally liable, with the Person with whom they participated, for the Payable Tax and Administrative Penalties.

The role of information exchange

Pillar Two significantly enhances tax transparency through the GIR and related exchange-of-information mechanisms. As a result, UAE authorities may have access to information reported in other jurisdictions and may identify inconsistencies between the UAE QDMTT position and information disclosed elsewhere.

The increased availability of information may also enable UAE authorities to compare positions reported in GIRs, Top-up Tax Returns, foreign tax returns, financial statements and other disclosures made by entities within the same MNE Group. This enhanced visibility may make inconsistencies, reporting anomalies and unexplained differences easier to identify.

Such information may assist in detecting discrepancies and initiating enquiries. However, inconsistencies alone do not establish Tax Evasion and the UAE authorities must still prove the relevant elements of liability under UAE law.

Likewise, a determination by a foreign tax authority that a GloBE position is incorrect does not automatically establish criminal liability in the UAE.

The UAE authorities must independently determine:

1. whether a UAE QDMTT shortfall arose;
2. whether illegal means were used; and
3. whether the requirements of Tax Evasion under UAE law have been satisfied.

Information obtained through the GIR framework may therefore constitute an important source of evidence, but it does not alter the substantive requirements of UAE criminal law.

The ultimate legal characterisation of the conduct remains a matter for the UAE legal system and UAE courts.

A changing enforcement environment

Pillar Two does not alter the legal definition of Tax Evasion under the UAE Law. What it changes is

the evidential landscape in which tax authorities operate.

Through centralised reporting, the GIR, the Top Tax Return and international information exchange, UAE authorities may have greater visibility over multinational tax positions than ever before. Consequently, future investigations may increasingly involve cross-border evidence, foreign decision-makers, multinational compliance processes and information originating from multiple jurisdictions.

The significance of Pillar Two therefore extends beyond the calculation of Top-up Tax itself . By increasing transparency and the volume of information available to tax authorities, it may materially influence how cross-border tax positions are scrutinised, investigated and evidenced in the UAE.

However, enhanced visibility does not alter the substantive requirements of UAE law. An incorrect UAE QDMTT position, an inconsistency in a GIR or Top-up Tax Return, or information obtained through international exchange mechanisms does not, without more, establish Tax Evasion. The relevant authorities must still demonstrate the legal elements of liability, including the use of illegal means and the requisite mental element where criminal liability is alleged.

Conclusion

Pillar Two does not create a global enforcement authority. However, it significantly increases transparency and the volume of information available to tax authorities through the GIR, Top-up Tax Returns, centralised reporting mechanisms and international information exchange. As a result, tax authorities may have greater visibility over positions adopted by MNE Groups across multiple jurisdictions and an enhanced ability to identify inconsistencies, omissions or unusual reporting outcomes.

Consequently, the focus of future disputes may extend beyond whether a Top-up Tax calculation is technically correct to how that position was developed, documented, reviewed and maintained. The existence of contemporaneous working papers, governance procedures, approval records and documented technical analyses may become increasingly important in demonstrating the basis upon which a particular position was adopted and reported.

While Pillar Two does not alter the legal threshold for Tax Evasion under UAE law, it may fundamentally reshape the evidential and enforcement environment in which cross-border tax positions are scrutinised, investigated and challenged. The increased availability of detailed information through the GIR, Top-up Tax Returns and international information exchange mechanisms, coupled with enhanced cooperation between tax authorities, is likely to result in greater scrutiny of the decision-making process underpinning Pillar Two positions.

Nevertheless, enhanced transparency does not alter the substantive requirements of UAE law. An incorrect QDMTT position, an inconsistency in a GIR or Top-up Tax Return, or information obtained through international exchange mechanisms does not, without more, establish Tax Evasion. The relevant authorities must still demonstrate the use of illegal means and satisfy the applicable requirements of criminal liability under UAE law.

For MNE Groups, robust governance, clear documentation and a well-supported compliance framework may therefore be as important as the underlying Top-up Tax calculation itself.

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