Sheikh Mohammed Introduces 20% Annual Tax on Foreign Banks in Dubai

Dubai Enacts 20% Annual Tax on Foreign Banks

A new law has been released governing taxes of foreign banks operating in Dubai. The requirements of the Act apply to all foreign banks operating in the emirate, including Special Development Zones and Free Zones. Those in the Dubai financial center are excluded.

The law stipulates that foreign banks are subject to an annual tax of 20 percent on taxable income, and if the foreign bank pays tax under the Corporate Tax Act, the corporate tax rate is deducted from this percentage.

The Act regulates rules for calculating taxable income, restrictions on submission of tax returns and payment of taxes, procedures for auditing tax returns and voluntary declarations, and duties and procedures related to the tax audit process. The law also specifies the rights of a foreign bank and its branches licensed by the Central Bank of the UAE to operate in Dubai and a person subject to tax audit.

The Act also allows objections to the Dubai Finance Department regarding the amount of tax or penalty imposed on them, subject to certain conditions described in the Act.

According to the law, the Chairman of the Dubai Administrative Council will issue a decision on the actions deemed to be in violation of this law and the penalties for the violations. The total fine imposed shall not exceed Dh500,000. Penalties are doubled for repeated violations within two years to a maximum of Dh1 million.