The new rule applies to all international banks in the city, except those in the Dubai International Financial Centre.
A recent law in Dubai demands a 20% yearly tax on foreign banks in the emirate. Experts think this will help banks and prevent them from paying taxes twice.
According to the law, foreign banks need to pay tax on their yearly taxable income. But if they already pay corporate tax, that amount will be subtracted from the 20% tax.
This law affects all foreign banks in Dubai, including those in special zones, except for banks in the Dubai International Financial Centre.
Experts say there’s confusion about whether foreign banks now have to pay an extra 20% tax on top of the 9% federal tax. But actually, foreign banks in the UAE have been paying a 20% corporate tax for years.
The new law aims to help these banks by making it clear they won’t pay double taxes. They can subtract the 9% federal tax from the 20% emirate tax they already pay.
The UAE introduced a 9% federal corporate tax starting from June 1, applying to companies making more than Dh375,000 ($102,110). Companies making less won’t be taxed.
The new Dubai banking tax rules will help foreign banks there. Without these rules, they might have had to pay 29% tax.
The law also brings penalties for violations, including fines up to Dh500,000. Repeat breaches within two years could lead to double fines, up to Dh1 million.
Banks need to understand and follow the new law’s requirements alongside the corporate tax law.
Source:
Khaleej Times
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