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His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE, has issued Law No. (1) of 2024 concerning the taxation of foreign banks operating in Dubai.
The law applies to all foreign banks operating in Dubai, including those within special development zones and free zones, except for foreign banks licensed to operate in the Dubai International Financial Centre (DIFC).
Under the new legislation, foreign banks are liable to a 20 per cent tax on their annual taxable income. However, if these banks already pay corporate tax in accordance with Federal Law No. (47) of 2022 on the Taxation of Corporations and Businesses and its subsequent amendments, the corporate tax amount will be deducted from their overall tax liability.
The law delineates the principles guiding the calculation of taxable income, tax filing and payment procedures, protocols for tax filing audits, voluntary disclosures as well as the responsibilities and procedures associated with tax audits.
Moreover, the law elucidates the rights of foreign banks and their branches authorised by the Central Bank of the UAE. It establishes the protocol for communicating the outcomes of tax audits and permits the taxable entity to raise objections with Dubai’s Department of Finance regarding the tax amount or fines imposed on them, subject to certain conditions as stipulated in the law.
According to the law, the Chairman of The Executive Council of Dubai will issue a decision on actions considered violations of this law and the penalties imposed for such violations. The cumulative penalties levied must not exceed Dh500,000, and for repeat violations within two years, the fine will be doubled up to a maximum of Dh1 million.
The new law will be applicable to the tax year commencing after its enactment. The Director-General of the Department of Finance will also issue the requisite decisions to execute the provisions of this law, which will be promulgated in the Official Gazette.
Moreover, this new legislation revokes Regulation No. (2) of 1996 or any other conflicting regulations. Decisions and memoranda issued to execute Regulation No. (2) of 1996 will remain valid until new decisions are issued to replace it.
Law No. (1) of 2024 on the taxation of foreign banks operating in Dubai becomes effective from the date of its publication in the Official Gazette.
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