Dubai Announces New 20% Annual Tax on Foreign Banks
A recent law issued in Dubai has introduced a 20% annual tax on foreign banks operating in the emirate, with the exception of those operating within the Dubai International Financial Centre (DIFC). This tax will be deducted from the annual taxes imposed on these companies.
His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE, as the Ruler of Dubai, issued the first law of 2024, which imposes an annual tax on all foreign banks operating in special development zones and free zones within the emirate.
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However, foreign banks licensed to operate within the DIFC are exempt from these provisions regarding the income generated from their business activities within or through the center.
Subject To Corporate Tax Standards
The law mandates foreign banks to adhere to an annual tax rate of 20% on their taxable income. However, this percentage is subject to deduction based on the corporate tax rate outlined in the corporate and business tax law, if the foreign bank settles the tax under this law.
New Tax Law Impacting Foreign Banks, in Dubai, except those in the Dubai Financial Centre.
20% annual tax on foreign banks’ taxable income, minus corporate tax.
The law provides a complete structure from income calculation to tax return submission and payment protocols,… pic.twitter.com/auLkLjpve8
— Abdulla Al Mulla | Auditing & Accounting (@am_audit) March 8, 2024
The law includes regulations for calculating taxable income, procedures for submitting tax returns and payments, protocols for auditing tax returns and voluntary declarations, as well as the rights of taxpayers, specifically foreign banks and their branches licensed by the Central Bank of the UAE to operate in Dubai.
Administrative violations and fines
In case of administrative violations, the law specifies fines not exceeding Dh500,000 for each violation, which may double for repeated violations within two years, not exceeding Dh1 million. Additionally, it outlines the duration of tax obligations and procedures for calculating time periods.
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Conclusion
The provisions of the corporate tax law and its related regulations shall apply to matters not covered by this law. This law applies to tax periods beginning after its provisions come into effect. For tax periods that commenced before the enactment of the law, the rules, procedures, and timelines for tax collection from branches of foreign banks in Dubai shall continue to apply.