DUBAI: In his capacity as the Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, issued Law No. (1) of 2024 on taxation of foreign banks operating in Dubai.

The Law applies to all foreign banks operating in Dubai, including special development zones and free zones, with the exception of foreign banks licensed to operate in the Dubai International Financial Centre (DIFC).

According to the law, foreign banks are subject to a 20% tax on their annual taxable income. However, if these banks pay corporate tax in accordance with Federal Law No. (47) of 2022 on the Taxation of Corporations and Businesses and its amendments, the amount of corporate tax will be deducted from their total tax liability.

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. The total penalties imposed should not exceed AED500,000. The fine will be doubled in case of repeat violations within two years up to a maximum of AED1 million.

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.

The new Law annuls Regulation No. (2) of 1996 or any other legislation that may contradict it. Decisions and memos issued to implement Regulation No. (2) of 1996 will remain in place till the issuance of new decisions that replace it.

Law No. (1) of 2024 on taxation of foreign banks operating in Dubai is effective from the date of its publication in the Official Gazette.