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Navigating Dubai’s New Tax Law for Foreign Banks

Dubai, UAE – Dubai Law No. (1) of 2024 on Taxation of Foreign Banks has brought significant changes to the taxation landscape for foreign banks operating in the Emirate. Here’s a concise overview:

Key Changes:

Tax Structure: Foreign banks were previously subject to a 20% tax on their annual taxable income at the Emirate level. With the new law, they are now subject to federal corporate income tax, but can claim a tax credit equivalent to the federal tax paid.

Scope: The law applies to all branches of foreign banks licensed by the Central Bank of the UAE operating in Dubai, except those in the Dubai International Financial Centre (DIFC).

Calculation of Taxable Income: Taxable income calculation follows provisions outlined in the Corporate Tax Law, with specific rules authorized by the Director General of the Department of Finance in certain instances.

Compliance Requirements: Foreign banks must submit tax returns within a specified timeframe, accompanied by audited financial statements and details of federal corporate tax paid.

Voluntary Disclosure: The law introduces a mechanism for voluntary disclosure, allowing correction of incorrect tax returns within 30 days of discovery.

Penalties: Details of fines for violations will be specified in executive regulations, with penalties for administrative violations, late payments, and tax evasion.

Implications and Assistance

Foreign banks operating in Dubai or planning to establish a presence must ensure compliance with the new law. Our expert Tax team is equipped to provide guidance and support for effective adaptation to regulatory changes.