Corporate Tax
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Dubai: A new law was issued reaffirming the existing 20 per cent  tax on foreign banks operating in Dubai, but excluding those operating in the emirate's international financial centre (DIFC).

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE, in his capacity as the Ruler of Dubai, issued the first law of 2024 applying an annual tax to all foreign banks operating in  special development zones and free zones within the emirate.

However, foreign banks licensed by DIFC are exempt from these provisions concerning the income they generate from doing business within or through the centre, according to a statement on WAM.

What this does is clarify that the tax on banks will remain at 20 per cent and not an additional 9 per cent, which is the UAE corporate tax on businesses. 

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Subject to corporate tax norms

"The law mandates foreign banks to adhere to an annual tax rate of 20 percent on their taxable income," the statement added. "This percentage is subject to deduction of the corporate tax rate outlined in the law concerning corporate and business tax, and if the foreign bank settles the tax under the corporate tax law.

"The law stipulates regulations for calculating taxable income, procedures for submitting tax returns and payment, protocols for auditing tax returns and voluntary declarations, as well as duties and procedures associated with the tax audit process.

"It outlines the rights of the taxpayer, specifically foreign banks and their branches licensed by the Central Bank of the UAE to operate in Dubai, along with procedures for notifying the outcomes of tax audits.

"The law also provides provisions for a taxable individual to raise objections to the Department of Finance regarding the amount of tax or fines levied on them under its regulations, subject to specific requirements delineated in detail within the law."

Administrative violations and fines

As per the law, administrative violations of its provisions and decisions issued accordingly will be determined by a decision from the Chairman of the Executive Council. Each violation carries a financial fine, not exceeding Dh500,000.

In the event of repeated violations within two years, the fine doubles, not exceeding Dh1 million. Additionally, the law outlines the duration of tax obligations and the procedures for calculating time periods.

The provisions of the corporate tax law and its related regulations, including rules, conditions, procedures, controls, and timelines concerning the tax period and other relevant matters not covered by this law, shall apply. This law shall apply to tax periods beginning after its provisions come into effect. 

For tax periods that commenced before the enactment of the tax law, the rules, procedures, and timelines pertaining to tax collection from branches of foreign banks in the emirate of Dubai shall continue to apply.