In a significant development for Dubai’s financial landscape, His Highness Sheikh Mohammed bin Rashid Al Maktoum has announced a new law regarding the taxation of foreign banks operating within the emirate. The enactment of this law marks a pivotal step towards enhancing fiscal regulations and ensuring transparency in the banking sector.
The newly issued law applies to all foreign banks operating in Dubai, encompassing special development zones and free zones, with the exception of institutions within the Dubai Financial Centre. Central to the legislation is the imposition of an annual tax of 20 percent on taxable income for foreign banks, with deductions for corporate tax rates as per the Corporate Tax Law, if applicable.
Outlined within the law are comprehensive provisions governing the calculation of taxable income, submission of tax returns, payment procedures, auditing protocols, and voluntary declarations. Additionally, the legislation delineates the responsibilities and procedures related to the tax audit process, ensuring adherence to stringent regulatory standards.
Under the purview of the law, foreign banks and their licensed branches operating in Dubai are subject to tax audit, with specified rights granted to the taxable entity. Provisions also allow for objections to be lodged with Dubai’s Department of Finance regarding tax amounts or fines imposed, subject to predefined conditions stipulated within the law.
In an effort to uphold compliance and enforce accountability, the Chairman of The Executive Council of Dubai is empowered to issue decisions pertaining to violations of the law and corresponding penalties. Penalties for violations are capped at a maximum of Dh500,000, with provisions for doubling fines in cases of repeat infractions within a two-year timeframe, up to a maximum of Dh1 million.
The introduction of this tax law reflects Dubai’s commitment to fostering a conducive regulatory environment that promotes financial stability, transparency, and sustainable growth. By implementing measures to regulate the operations of foreign banks, Dubai aims to bolster its position as a leading global financial hub while safeguarding the interests of stakeholders and enhancing investor confidence.
As Dubai continues to evolve as a dynamic economic powerhouse, proactive measures such as the implementation of this tax law underscore the emirate’s unwavering dedication to economic diversification and resilience. With a focus on fostering a business-friendly ecosystem and maintaining robust regulatory frameworks, Dubai reaffirms its status as a preferred destination for international businesses and investors seeking opportunities in the region’s thriving financial sector.
