Dubai issued a law mandating a 20 per cent annual tax on foreign banks operating in the emirate, with exceptions granted to those licensed within the Dubai International Financial Centre.
The law, which was passed on Thursday by Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, governs the guidelines for determining taxable income and the protocols for filing tax returns, the Dubai Media Office wrote on X.
It will also regulate the procedures for auditing tax returns and voluntary disclosures, as well as the responsibilities and procedures associated with tax audit proceedings, the office said.
The provision of the law covers all foreign banks that operate in Dubai, including special development zones and free zones. It said the corporate tax rate would be deducted from the annual 20 per cent tax if the foreign bank paid tax under the Corporate Tax Law.
The chairman of the Executive Council of Dubai will issue a decision on breaches and impose penalties, according to the new law.
The total penalties imposed should not exceed Dh500,000 ($136,147), the media office said in a statement, adding that the fine will be doubled in case of repeat breaches within two years, up to a maximum of Dh1 million.
The director general of the Department of Finance will issue the necessary decisions to implement the provisions of the new law, which will be published in the official gazette, the statement said.
The law also specifies the rights of the person subject to tax audit, which is the foreign bank and its branches licensed by the UAE Central Bank to operate in Dubai.
Banks in the UAE are well placed to continue posting strong earnings this year, capitalising on an improving macroeconomic environment and consistently high interest rate regime supporting their profit margins, S&P Global Ratings said in its report on UAE banking last month.
The increased business and trading activity that supported non-interest income and bottom-line growth last year will also boost profitability in 2024, the ratings agency said.
Dubai’s economy expanded by an annual 3.3 per cent in the first nine months of last year, driven by growth in the emirate's tourism and transport sectors, the latest government data shows.
In October, the UAE Central Bank increased its 2024 growth forecast for the country's economy to 5.7 per cent, from 4.3 per cent previously, due to an expected rise in oil production.
