Sheikh Mohammed imposes a new 20% annual tax on foreign banks
With the exception of banks located in the Dubai Financial Centre, all international banks doing business in the emirate are subject to the new tax legislation that was passed not long ago.
Under this legislation, international banks are required to pay a 20% yearly tax on their taxable income. If the bank is subject to taxes under corporate tax legislation, its tax rate will be subtracted from this percentage.
The legislation provides guidelines for calculating taxable income, submitting tax returns, paying taxes, auditing tax returns, voluntary declarations, and procedures related to tax audits. It also outlines the rights of the taxable entity, which includes foreign banks and their branches licensed by the Central Bank of the United Arab Emirates to operate in Dubai.
Moreover, the law grants the taxable entity the right to file objections with Dubai's Department of Finance regarding tax amounts or fines imposed, subject to specific conditions delineated within the law. The Chairman of the Executive Council of Dubai is empowered to issue decisions regarding acts considered violations of this law and the corresponding penalties.
Penalties for violations are capped at a total of Dh500,000, with the fine doubled for repeat violations within two years, up to a maximum of Dh1 million. These regulations aim to streamline the taxation process for foreign banks operating in Dubai, ensuring compliance with tax laws while facilitating effective financial operations within the emirate.
The legislative framework also serves to create transparency and accountability in the taxation system, providing clear guidelines for tax calculations, submissions, and audits. By delineating the rights and responsibilities of taxable entities and the regulatory authorities, the law aims to promote fairness and integrity in tax-related matters within the banking sector.
Furthermore, the provision allowing objections to tax assessments or fines offers a mechanism for addressing potential disputes or discrepancies, enhancing the overall effectiveness and credibility of the tax regime. Overall, the enactment of this law reflects Dubai's commitment to fostering a conducive business environment while maintaining robust regulatory oversight to safeguard economic stability and integrity.
