Dubai Imposes 20% Annual Tax on Foreign Banks

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Dubai has enacted a law imposing a 20 percent annual tax on foreign banks operating in the emirate, with exceptions granted to those licensed within the Dubai International Financial Centre (DIFC).
The law, passed by Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, governs guidelines for determining taxable income, filing tax returns, and regulating auditing procedures, according to the Dubai Media Office.
All foreign banks operating in Dubai, including those in special development zones and free zones, fall under the provision of the law. However, the corporate tax rate will be deducted from the annual 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 impose penalties, with total penalties capped at Dh500,000 ($136,147). Repeat breaches within two years will result in doubled fines, up to a maximum of Dh1 million.
The director general of the Department of Finance will issue necessary decisions to implement the provisions of the new law, which will be published in the official gazette.
The law also outlines the rights of foreign banks subject to tax audits, including branches licensed by the UAE Central Bank to operate in Dubai.
Despite the tax, banks in the UAE are expected to continue posting strong earnings in 2024, benefiting from an improving macroeconomic environment and consistently high interest rates, according to S&P Global Ratings. Increased business and trading activity, which supported non-interest income and bottom-line growth in the previous year, are anticipated to boost profitability in 2024.
Dubai’s economy expanded by 3.3 percent annually in the first nine months of the previous year, driven by growth in the tourism and transport sectors. The UAE Central Bank increased its 2024 growth forecast for the country’s economy to 5.7 percent, attributing the rise to expected growth in oil production.