What does the new Law No. (1) of 2024 on Taxation of Foreign Banks in Dubai entail, and how does it impact the tax burden on foreign bank branches?

The new Law No. (1) of 2024, enacted by His Highness Sheikh Mohammed bin Rashid Al Maktoum on 1 March 2024, repeals the 1996 Regulation governing the taxation of foreign banks in Dubai and addresses concerns regarding the potential increased tax burden following the introduction of UAE Corporate Tax in June 2023. The law applies to branches of foreign banks licensed by the Central Bank of the UAE, with the exception of those operating in the DIFC. Under the 2024 Law, these branches are subject to both the UAE Corporate Tax (currently 9%) and the 2024 Dubai Banking Tax (set at 20%). However, the combined tax rate cannot exceed 20%, as the UAE Corporate Tax is deducted from the Dubai Banking Tax, effectively capping the total tax at 20%. This ensures that foreign bank branches are not burdened with higher taxes than under the previous 1996 Regulation. The law also includes penalties for tax evasion, late payment, or administrative violations, with fines that can reach up to 500,000 Dirhams per violation.

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