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 (DIFC).
Read: Guide to understanding UAE corporate tax relief
However, if these banks pay corporate tax, the amount of corporate tax will be deducted from their total liability.
What the tax law covers
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 AED500,000. The fine will be double up to a maximum of AED1 million in case of repeat violations.
This new law applies to the tax year beginning after its enactment.
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