The Emirate of Dubai has unveiled plans to implement a change in its tax policy affecting foreign banks operating within its jurisdiction. As per to to a report published on the website of the Prime Minister of the UAE and Emir of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, starting from the year 2025, foreign banks will be subject to an annual tax of 20%.
This new tax regulation is set to encompass all foreign banks in Dubai, including those located within special development zones and free zones. However, an exception will be made for organizations licensed to operate within the Dubai International Financial Centre (DIFC).
The statement released regarding the new tax law outlines its key provisions, stating,
"The law provides that an annual tax of 20% is levied on foreign banks on taxable profits. However, if banks pay corporate tax, then the amount of corporate tax is deducted from this percentage."
In the event of non-compliance with the new tax regulations, penalties will be enforced. Violators may face fines of up to 500,000 dirhams ($136,000). For repeated violations within a two-year period, fines can be doubled, reaching up to 1 mn dirhams ($272,500).
This move comes in the wake of the introduction of a 9% corporate tax in the UAE, effective from June 1, 2023. The corporate tax is applicable to both residents and non-residents, encompassing legal entities and individuals alike. Exempt from this tax are government agencies, mining enterprises, as well as religious and cultural organizations.
The decision to impose a 20% annual tax on foreign banks reflects Dubai's efforts to diversify its revenue streams and bolster its fiscal framework.
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