Dubai: Sheikh Mohammed announces new 20% annual tax on foreign banks

A new law has been issued regarding the tax on foreign banks operating in Dubai. The provisions of the law apply to all foreign banks operating in the emirate, including special development zones and free zones. Those in the Dubai Financial Centre are excluded.

The law stipulates that an annual tax of 20 per cent shall be imposed on foreign banks on taxable income, and the corporate tax rate shall be deducted from this percentage, if the foreign bank pays the tax under the Corporate Tax Law.

The law regulates the rules for calculating taxable income, the controls for submitting the tax return and paying the tax, the procedures for auditing the tax return and voluntary declaration, and the duties and procedures related to the tax audit process. The law also specifies the rights of the person subject to tax audit, which is the foreign bank and its branches licensed by the Central Bank of the United Arab Emirates to operate in Dubai.

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The law also allows the taxable entity to lodge objections with Dubai’s Department of Finance regarding the amount of tax or fines imposed on them, subject to certain conditions detailed in the law.

According to the Law, the Chairman of The Executive Council of Dubai will issue a decision on acts deemed as violations of this Law and penalties imposed for violations. The total penalties imposed should not exceed Dh500,000. The fine will be doubled in case of repeat violations within two years up to a maximum of Dh1 million.

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