In a significant development for Dubai’s financial landscape, His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, has issued Law No.(1) for 2024, outlining a 20% tax on foreign banks operating within the emirate. The law applies to foreign banks across various zones, with specific exclusions for those licensed within the Dubai International Financial Centre (DIFC).
The legislation mandates an annual tax of 20% on taxable income for foreign banks, with provisions allowing for the deduction of corporate tax applied under Federal Decree Law No.47 for 2022 on taxation of corporations and businesses. The law provides guidelines for calculating taxable income and establishes a mechanism for objection by taxable individuals at the Department of Finance, subject to specified requirements.
In cases of non-compliance, the law outlines fines determined by the Chairman of the Executive Council, with a cap set at Dhs500,000. Repeat offenses within two years may lead to a doubled fine, not exceeding Dhs1 million. The law also revokes Regulation No.2 for 1996 concerning tax collection from branches of foreign banks in Dubai, and any conflicting texts in other legislation are rendered void in light of the new provisions.
While the law comes into effect upon publication in the Official Gazette, existing decisions and instructions in line with Regulation No.2 for 1996 remain applicable until replaced by new measures consistent with Law No.1 for 2024.
This move signals a significant step in regulating the taxation framework for foreign banks in Dubai, aligning with broader efforts to enhance financial governance and ensure economic sustainability.
