Dubai issues landmark law regulating taxation of foreign banks
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In his capacity as Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates, promulgated Law No. (1) of 2024 on taxes on foreign banks operating in Dubai.
The Law applies to all foreign banks operating in Dubai, including special development zones and free zones, with the exception of foreign banks licensed to operate in the Dubai International Financial Center (DIFC).
Under the law, foreign banks are subject to a 20% tax on their annual taxable income. However, if these banks pay corporate tax in accordance with Federal Law No. (47) of 2022 on Taxation of Companies and Businesses as amended, the amount of corporate tax will be deducted from their total tax liability.
The Law specifies the principles governing the calculation of taxable income, the declaration and payment of taxes, the procedures for the audit of the tax return, the voluntary declaration and the responsibilities and procedures related to the tax audit.
The law also outlines the rights of foreign banks and their branches authorized by the Central Bank of the United Arab Emirates. Specifies the steps to notify the results of the tax audit. Furthermore, it allows the taxable entity to file objections to the Dubai Finance Department regarding the amount of tax or penalties imposed on it, subject to certain conditions detailed in the law.
According to the Law, the Chairman of the Executive Council of Dubai will issue a decision on the acts considered violations of this Law and the penalties imposed for violations. The total penalties imposed must not exceed AED 500,000. The fine will be doubled for repeat offenses within two years to a maximum of AED 1 million.
This new Law applies to the fiscal year that begins after its promulgation.
The Director General of the Department of Finance will also dictate the necessary decisions to apply the provisions of this Law, which will be published in the Official Gazette.
The new Law annuls Regulation No. (2) of 1996 or any other legislation that may contradict it. Decisions and memoranda issued to implement Regulation No. (2) of 1996 will remain in force until new decisions are issued replacing it.
Law No. (1) of 2024 on Taxation of Foreign Banks Operating in Dubai comes into force from the date of its publication in the Official Gazette.
News source: Emirates News Agency
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