Sheikh Mohammed issues law imposing 20% tax on foreign banks in Dubai

Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai has issued a law imposing a 20 per cent annual levy on foreign banks, except those domiciled in the Dubai International Financial Centre (DIFC).

The law governs the calculation of taxable income as well as tax filing and payments. It will also regulate the procedures for auditing tax filing, and voluntary disclosure as well as responsibilities and procedures related to tax auditing.

The statute covers all foreign banks that operate in all free and special development zones.

It stipulates that the 9 per cent corporate tax, that went into effect in the UAE last year, will be deducted from the 20 per cent if the foreign bank pays the tax under the country’s corporate tax law.

The law also outlines the rights of foreign banks and their branches licensed by the Central Bank of the UAE to operate in Dubai, the Middle East’s financial hub.

The law also 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.

The provision of the law allows the Chairman of The Executive Council of Dubai to issue a decision on acts deemed as violations and penalties imposed for the violations.

Foreign banks that violate the law face a stiff penalty that does not exceed Dhs500,000. The fine will be doubled in case of repeat violations within two years up to a maximum of Dhs1m.

Read: Stiff Dhs10,000 fine announced for UAE corporate tax dodgers