Foreign banks operating in Dubai will have to pay a 20% annual tax, according to a new law issued by HH Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai.
The institutions licensed within the Dubai International Financial Centre (DIFC) will be exempt from paying this tax, according to the press release published by the Dubai media office.
The amount is set to be deducted from the annual 20% tax if the foreign bank paid tax under the corporate tax law.
The total penalties imposed should not exceed Dh500,000 ($136,147), the statement added. However, the fine will be doubled in case of repeat breaches within two years, up to a maximum of Dh1 million.
In addition to the new tax, the law also establishes procedures for auditing tax returns and voluntary disclosures, as well as the responsibilities and procedures associated with tax audit proceedings. Additionally, it provides provisions for taxable individuals to raise objections to the Dubai Department of Finance regarding the amount of tax or fines levied on them.
The new tax will only apply for tax periods that commence after the enactment of the law.
The UAE’s recently introduced corporate tax law reshaped the nation’s fiscal landscape. As a result, mainland companies will be subject to a standard corporate tax rate of 9% on their taxable income over Dh375,000.
Last month, the UAE Federal Tax Authority (FTA) announced the deadlines for taxable persons subject to corporate tax to apply to register with the FTA and avoid violating tax laws. Companies that fail to meet them will face fines of Dh10,000 ($2,700).
