Dubai Introduces Corporate Income Tax for Foreign Banks - Smart Zones® UAE
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Dubai Introduces Corporate Income Tax for Foreign Banks

The Emirate of Dubai has implemented a new legal framework for the taxation of foreign banks operating within its jurisdiction. Law No. (1) of 2024, issued by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, outlines the key provisions governing this taxation regime.

The Law applies to all foreign banks operating in Dubai, encompassing those located in special development zones and free zones. Notably, foreign banks licensed within the Dubai International Financial Centre (DIFC) are exempt from these new tax regulations.

Foreign banks are subject to a 20% tax on their annual taxable income as determined by the Law. However, if these banks have already paid corporate tax under Federal Law No. (47) of 2022, the amount paid towards corporate tax will be deducted from their overall tax liability under this new framework.

The Law establishes clear guidelines for calculating taxable income, filing and paying taxes, and procedures related to tax audits, voluntary disclosures, and tax audit-related responsibilities. Additionally, it outlines the rights of foreign banks and their branches licensed by the Central Bank of the UAE.

The Law specifies the process for notifying foreign banks of their tax audit results and allows them to lodge objections with Dubai’s Department of Finance regarding the assessed tax amount or imposed fines, subject to established legal conditions. Furthermore, the Law outlines potential penalties for violations, with a maximum penalty of AED 500,000 ($136,100) for the first offense and a maximum of AED 1 million ($272,200) for repeat offenses within a two-year period.

This Law applies to tax years commencing after its official publication in the Dubai government’s Official Gazette. The Director-General of the Department of Finance will issue additional regulations to facilitate the implementation of this Law.

This new Law supersedes Regulation No. (2) of 1996 and any other conflicting legislation. Decisions and memorandums enforcing Regulation No. (2) of 1996 will remain valid until replaced by new regulations under the new Law.

Law No. (1) of 2024 signifies the official commencement of this new tax regime for foreign banks operating in Dubai.

   

Publish 6 Mar 2024

Source: https://www.arabianbusiness.com/industries/banking-finance/dubai-announces-new-tax/

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