Foreign banks operating in Dubai will face a new 20% tax on their annual taxable income, according to a law issued by Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister of the United Arab Emirates and Ruler of Dubai on March 10.
The law applies to all foreign banks in Dubai, including those in special development zones and free zones, but excludes foreign banks licensed in the Dubai International Financial Centre (DIFC), the WAM news agency reported.
If these banks pay corporate tax under the Federal Corporate Tax Law of 2022, that amount will be deducted from their total tax liability under the new Dubai law.
The law specifies rules for calculating taxable income, filing taxes, audits, voluntary disclosures, and tax audit procedures and responsibilities. It outlines the rights of foreign banks and branches licensed by the UAE Central Bank, including steps to notify audit results and allowing objections to tax amounts or penalties.
The Chairman of Dubai's Executive Council will issue a decision on violations and penalties, which cannot exceed AED500,000 ($136,000).
Repeat violations within two years can lead to doubled fines up to AED1mn.
The law applies to the tax year beginning after its enactment. Dubai's Director-General of Finance will issue necessary decisions to implement the law's provisions, to be published in the Official Gazette.
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