Dubai, UAE — Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum has issued a law that imposes a 20 percent annual tax on foreign banks operating in the emirate, except those licensed to operate in the Dubai International Financial Centre (DIFC).
Besides all foreign banks operating in Dubai, the law applies to special development zones and free zones.
It stipulates that the 9 percent corporate tax that went into effect in the UAE last year will be deduced from the 20 percent annual tax if the foreign bank pays the tax under the country’s corporate tax law.
The Law specifies the principles governing the calculation of taxable income, tax filing and payments, procedures for the audit of tax filing, voluntary disclosure, and responsibilities and procedures related to tax auditing.
The law also outlines the rights of foreign banks and their branches licensed by the Central Bank of the UAE. It specifies the steps for notifying the results of the tax audit. Further, it 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. Violators will be fined up to AED500,000 and AED1 million in case of repeat violations within two years.
This new Law applies to the tax year beginning after its enactment. The Director-General of the Department of Finance will also issue the necessary decisions to implement the provisions of this Law, which will be published in the Official Gazette.
