Dubai updates legislation for foreign banks.

Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, in his capacity as Ruler of Dubai, has issued Law No. (1) of 2024 on the taxation of foreign banks.

The law applies to all foreign banks operating in Dubai, including those in special development zones and free zones, with the exception of foreign banks licensed to operate in the Dubai International Financial Centre (DIFC).

Dubai to tax foreign banks
Under the law, foreign banks will be subject to a 20% tax on their annual taxable income. However, if these banks pay corporate tax under Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses (as amended), the amount paid in corporate tax will be deducted from their total tax liability.

The law outlines the principles governing the calculation of taxable income, the filing of tax returns, tax payment, procedures for tax return audits, voluntary disclosures, and obligations and procedures related to tax audits. It also defines the rights of foreign banks and their UAE Central Bank–licensed branches, and sets out the steps for notifying them of tax audit results.

The law allows a taxable person to file an objection with the Dubai Department of Finance regarding the amount of tax or fines imposed, subject to certain conditions specified in the law. The Chairman of the Executive Council of Dubai will issue a decision defining acts considered violations of the law and the penalties applicable for such violations.

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The new law applies to tax periods commencing after its issuance. The Director General of the Department of Finance will also issue the necessary decisions to implement the provisions of the law, which will be published in the Official Gazette.

Law No. (1) of 2024 repeals Decree No. (2) of 1996 and any other legislation that conflicts with it. Decisions and circulars issued to implement Decree No. (2) of 1996 will remain in force until replaced by new ones.

Law No. (1) of 2024 on the taxation of foreign banks operating in Dubai takes effect from the date of its publication in the Official Gazette.

Source: Arabian Business

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