Dubai has enacted a law stipulating a 20 percent annual tax on foreign banks operating within the emirate, except for those licensed within the Dubai International Financial Centre, according to an announcement from the Dubai Media Office. Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, passed the law on Thursday, outlining guidelines for determining taxable income, protocols for tax return filing, and procedures for auditing tax returns. The law applies to all foreign banks in Dubai, encompassing special development and free zones. The corporate tax rate will be subtracted from the 20 percent tax if the foreign bank pays tax under the Corporate Tax Law. The Chairman of the Executive Council of Dubai will issue decisions on breaches and penalties under the new law, with a maximum penalty of Dh500,000 ($136,147), doubling for repeat breaches within two years, up to a maximum of Dh1 million. The Director General of the Department of Finance will implement the law, specifying the rights of foreign banks subject to tax audit.
According to S&P Global Ratings’ report on UAE banking released last month, banks in the UAE are well-positioned to maintain robust earnings this year. Additionally, the increased business and trading activity seen last year, supporting non-interest income and overall growth, is expected to further enhance profitability in 2024, as stated by the ratings agency. Government data indicates that Dubai’s economy grew by an annual rate of 3.3 percent in the first nine months of last year, largely propelled by growth in the emirate’s tourism and transport sectors. Moreover, in October, the UAE Central Bank raised its 2024 growth forecast for the country’s economy to 5.7 percent, up from 4.3 percent previously, citing an anticipated increase in oil production.
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