Dubai announces 20% annual tax on foreign banks

According to a new law, foreign banks in Dubai have to pay 20% annual tax. The provisions of the law apply to all foreign banks operating in the emirate, including special development zones and free zones. Those in the Dubai Financial Centre are excluded.

The law stipulates that an annual tax of 20 per cent shall be imposed on foreign banks on taxable income, and the corporate tax rate shall be deducted from this percentage, if the foreign bank pays the tax under the Corporate Tax Law.

The law regulates the rules for calculating taxable income, the controls for submitting the tax return and paying the tax, the procedures for auditing the tax return and voluntary declaration, and the duties and procedures related to the tax audit process. The law also specifies the rights of the person subject to tax audit, which is the foreign bank and its branches licensed by the Central Bank of the United Arab Emirates to operate in Dubai.

Corporate Tax in Dubai

Dubai operates under the United Arab Emirates (UAE) corporate tax system, which took effect in June 2023. Here’s a breakdown of the key points:

• Standard Rate: 9% for taxable income exceeding AED 375,000 (roughly USD $100,000).
• Lower Rate: 0% for taxable income up to AED 375,000.
• Higher Rate (to be determined): Applies to large multinationals meeting specific criteria under the OECD’s Base Erosion and Profit Shifting (BEPS) project.

It’s important to note that there are exceptions and complexities to the system. For instance, there’s a separate tax rate for branches of foreign banks and income from specific industries like oil and gas may be taxed differently.