Dubai has recently issued Law No. (1) of 2024 that aims to streamline taxation processes and ensure financial transparency. The Law introduces significant changes to the taxation framework for foreign banks operating in Dubai, which will take effect on March 8, 2024.
The Law applies to all foreign banks operating in Dubai, except those licensed within the Dubai International Financial Centre (DIFC). The tax rate for foreign banks subject to the Law will be 20% of their annual taxable income. However, they can offset corporate tax paid under the CIT to avoid double taxation.
The Law provides:
Clear guidelines for calculating taxable income.
Incorporating rules set forth by the Dubai Department of Finance (DOF).
Covering various aspects such as exempt income.
Unrealized gains or losses.
Headquarter expenses.
Regional expenses.
If DOF regulations do not cover certain matters, provisions from the Corporate Tax Law will be invoked.
Compliance Requirements
Foreign banks must adhere to specified timelines for filing tax declarations, as determined by the DOF. They must submit accurate and comprehensive tax returns, audited financial statements, and documentation of tax payments to avoid rejection. Taxpayers have a 30-day window to disclose any discrepancies in tax payments voluntarily.
The Law outlines detailed procedures for tax audits, emphasizing transparency and due process. Taxpayers must be notified at least five days before an audit, and audit results must be submitted to the DOF within ten days of completion. Severe penalties apply in cases of tax evasion or non-compliance, including fines of twice the evaded tax amount and monthly penalties for late payments.
Foreign banks operating in Dubai must carefully evaluate the implications of this new Law on their operations and tax liabilities. Though the new Law replaces previous taxation frameworks, certain ambiguities remain, necessitating further clarification from regulatory authorities. The Law’s enactment underscores Dubai’s commitment to enhancing fiscal governance and aligning its taxation policies with global standards.
How TME Services Can Support Your Business Regarding the New Tax Regulations
Law No. (1) 2024 represents a significant milestone in Dubai’s journey towards a more robust and transparent taxation regime for foreign banks. By implementing clear guidelines and procedures, Dubai aims to foster investor confidence, promote economic growth, and ensure equitable taxation practices. As foreign banks navigate the complexities of this new legislation, complying proactively and engaging with regulatory authorities will be critical to ensure a smooth transition and continued success in Dubai’s thriving financial landscape.
At TME Services, our team of 45 experts is ready to help your business make the most of these opportunities. With over 18 years of experience in the UAE and the Middle East, we specialize in legal, tax, accounting, and compliance matters.
