Dubai: Law No. (1) of 2024 on the taxation of foreign banks operating in Dubai was issued by Sheikh Mohammed bin Rashid Al Maktoum, Ruler of Dubai, Vice President and Prime Minister of the UAE.
Except for foreign banks permitted to operate in the Dubai International Financial Centre (DIFC), the Law applies to all foreign banks operating in Dubai, including special development zones and free zones.
The legislation states that foreign banks must pay a 20 percent tax on their taxable revenue each year. However, the amount of corporation tax paid by these institutions will be subtracted from their overall tax burden if they comply with Federal Law No. (47) of 2022 on the Taxation of Corporations and Businesses and its modifications.
The Law lays forth the guidelines for determining taxable income, paying taxes and making payments on them, auditing tax returns, voluntary disclosure, and duties and processes associated with tax auditing.
The statute also describes the privileges granted to international banks and their branches by the UAE Central Bank. It outlines the procedures for informing parties of the tax audit’s findings. In addition, subject to specific legal requirements, it enables the taxable organization to file complaints with Dubai’s Department of Finance against the amount of tax or fines assessed against them.
The Law states that actions considered to be in violation of this Law shall be decided upon by the Chairman of the Executive Council of Dubai, and that infractions would result in fines. Penalties should not be assessed in excess of AED 500,000 ($135,000) in total. If the infraction is committed again within two years, the punishment would be quadrupled, up to a maximum of AED 1 million.
violations within two years up to a maximum of AED1 million. This new Law applies to the tax year beginning after its enactment.
The Director-General of the Department of Finance will also issue the necessary decisions to implement 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 memos issued to implement Regulation No. (2) of 1996 will remain in place till the issuance of new decisions that replace it. Law No. (1) of 2024 on taxation of foreign banks operating in Dubai is effective from the date of its publication in the Official Gazette.