The United Arab Emirates (UAE) keeps evolving with time. It has numerous laws that were revised to keep up with the economic growth. Laws and regulations related to finance are usually about taxation. The tax lawyers manage companies to pay their taxes regularly by the new tax percentage, each year. However, there have been recent changes in the annual tax for foreign banks in Dubai. The new law of taxation of foreign banks operating in Dubai has been implemented since 2024 and replaced the law of 1996. You can also Learn Here about New Law.
New Law for Foreign Banks
Previously, the foreign banks had to pay 20% tax annually in Dubai at the Emirate level on their taxable income. The law has been slightly changed with the federal corporate income tax issuance. The percentage remains the same for foreign banks, which is 20%. The new law ensures that there is no double taxation and the tax credit will remain with federal corporate tax that is paid by the foreign bank as a deduction of 20% tax rate as per the law.
Scope of the Law in Dubai
The law is applied to all foreign banks in Dubai that are licensed by the Central Bank of the UAE. However, the law does not apply to the banks operating under Dubai International Financial Centre (DIFC). Scope of law and services of Law in Dubai, can also be grabbed online. Dubai offers quality digital and electronic system in world.
How is Taxable Income Calculated?
The taxable income is calculated according to the corporate tax law implemented in Dubai. However, the calculations are different for the activities that come under the Director General (DG) Finance. These include joint revenues and expenses, and other expenses conducted for administration and regional purposes.
Foreign Bank Submits Tax Returns
The Foreign Bank has to submit the tax returns to DG Finance with a deadline. Further, it involves the audited financial statements, amount of tax payable and supporting documents that ensure the taxable amount, especially the proof of paying Federal corporate tax.
What if the Tax Paid Has a Wrong Amount?
If the Foreign Bank has paid an incorrect tax amount, whether it was extra or little, they can correct the tax returns within 30 days as soon as they find out that the tax return has a wrong amount.
Tax Audit and Rights of the Foreign Bank
The law has outlined the process of tax audit, keeping in mind the rights of the Foreign Bank. If there is an objection or a tax penalty, it is mentioned in the Law. The penalties for administrative violations are not more than AED 500,000. If this happens twice, then the fine is doubled. Consequently, in case of late submission of the tax amount, 2% of the unpaid tax is paid as a fine. If the individual tries to avoid the tax, they will pay the double amount of tax that was tried to evade.
How are Foreign Bank Operations Affected?
If you are operating in Dubai as a Foreign Bank, you should understand the importance of the new Law and how it can impact the bank. Most importantly, the bank should comply with the law to avoid any penalty.
Hiring a Legal Expert?
Whether you are an individual or an entity, you should hire a team of legal experts to guide you better. Banks in the UAE will need different types of lawyers, such as corporate lawyers and tax lawyers. They cannot have one legal consultant to manage everything because every lawyer has their expertise in the banking sector.
Finding the Perfect Legal Team in Dubai
If you are working in the banking sector, and you know that your bank needs a legal expert, it is important to interview as many lawyers as you can. Each one of them will have different knowledge and level of expertise. You have to find the one who knows most of the things in the banking sector and has previous work experience in Dubai banks. A qualified lawyer will be updated with the Dubai laws all the time. However, these lawyers may ask you for a good amount of money, but then you have to keep up with the reputation of your bank, as well. Therefore, do not let go of a legal expert if they are charging a little above then your budget.
