New Tax Law Imposes 20% TAX on Foreign Banks in Dubai, Excluding DIFC Operations

Dubai, 08 March, 2024 :  Breaking News : Sheikh Mohammed bin Rashid Al Maktoum Introduces Tax Law for Foreign Banks in Dubai

In a significant move aimed at regulating the financial landscape of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, the Vice President and Prime Minister of the UAE and Ruler of Dubai, has issued Law No. (1) of 2024 concerning the taxation of foreign banks operating within the emirate.

Key highlights of the newly introduced law include:

• Scope of Application: The law encompasses all foreign banks operating in Dubai, with the exception of those licensed within the Dubai International Financial Centre (DIFC).

• Taxation Rate: Foreign banks are now subject to a 20% tax on their annual taxable income. However, this tax liability will be reduced by the amount of corporate tax paid under Federal Law No. (47) of 2022 on the Taxation of Corporations and Businesses and its amendments.

• Tax Calculation and Filing Procedures: The law outlines clear principles governing the calculation of taxable income, tax filing, and payment procedures. Additionally, it establishes protocols for tax audits, voluntary disclosures, and procedures related to objections and appeals.

• Penalties for Violations: Penalties for violations of the law will be decided upon by the Chairman of The Executive Council of Dubai, with a maximum penalty set at AED500,000. Repeat offenses within a two-year period will face doubled fines, up to a maximum of AED1 million.

• Implementation and Publication: Effective from its publication in the Official Gazette, the law will come into force for the tax year following its enactment. The Director-General of the Department of Finance will issue necessary decisions to ensure the implementation of the law.

• Revocation of Previous Legislation: The new law annuls Regulation No. (2) of 1996 and any other conflicting legislation. However, decisions and memos issued under Regulation No. (2) of 1996 will remain valid until replaced by new decisions.

This legislative action underscores Dubai's commitment to enhancing transparency and governance within its financial sector while ensuring a fair and conducive environment for foreign banks operating within its jurisdiction.