FOREIGN BANKS IN DUBAI TO PAY 20 PERCENT TAX ON ANNUAL TAXABLE INCOME

Lenders’ overall liability to be reduced with corporate tax payment

Foreign banks operating in Dubai will be subject to a 20 percent tax on their annual taxable income. This was announced by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, in his capacity as the Ruler of Dubai. Law No. (1) of 2024 on taxation of foreign banks in Dubai applies to all foreign banks operating in the emirate. It includes banks operating in special development zones and free zones. The law exempts foreign banks licensed to operate in the Dubai International Financial Centre. However, if these banks pay corporate tax, the amount of corporate tax will be deducted from their total liability. The law specifies the principles governing the calculation of taxable income, tax filing and payments, procedures for the audit of tax filing, voluntary disclosure, and responsibilities and procedures related to auditing.

The law also outlines the rights of foreign banks and their branches licensed by the Central Bank of the UAE. It specifies the steps for notifying the results of the audit. Further, it allows the taxable entity to lodge objections with Dubai’s Department of Finance regarding the amount of tax or fines imposed on them.

According to the law, the chairman of The Executive Council of Dubai will issue a decision on acts deemed as violations of this law and penalties imposed for violations. The total penalties imposed should not exceed AED 500,000. The fine will be double up to a maximum of AED 1 million in case of repeat violations.

This new law applies to the tax year beginning after its enactment.