Page 16 - ICAI UAE TAX UPDATE_APRIL 2024

3.2 OTHER TAX UPDATES

New Emirate Law Issued for Foreign Banks Based in Dubai

On March 8, 2024, Dubai’s ruler issued Law No. (1) of Penalty Provisions
2024, replacing Regulation No. (2) of 1996. The new law Particulars New Emirate Law
strictly imposes a 20% tax on the annual taxable income
of branches of foreign banks in Dubai, except for those Tax Evasion Penalty 2x the amount of Tax evaded
operating within the Dubai International Financial Delay in Payment of 2% of the amount of unpaid
Centre (DIFC) under the oversight of the Dubai Financial Emirate level tax and/or tax or penalty for each month
Services Authority (DFSA). Penalty of delay or part thereof
Upper limit on penalties • Cannot exceed AED
Previously, foreign bank branches in Dubai were subject levied 500,000 per
to a 20% Emirate-level tax. However, the new Federal CT administrative
Law introduced a 9% corporate tax, which could have violation.
resulted in double taxation. But the new Emirate Law • Up to 2 times in case
provides a solution by allowing foreign bank branches of repetition of same
violation within 2
to deduct the Federal CT from the Emirate-level tax, years
thereby reducing the burden of double taxation.

The new Emirate Law is aligned with the old law in terms
of computing taxable income and is also correlated with
the Federal CT Law. It permits the deduction of Federal
CT from the Emirate-level tax to prevent double taxation.
Taxpayers must comply with the law by filing tax returns,
making voluntary disclosures, maintaining records, and
following detailed provisions for tax audits. They can
also file objections and appeals, but the implementation
of this law will be closely monitored by the DG through
executive decisions.

16 www.icaidubai.org

UA E TAX UP DATE NEWSLET TER ISSUE 01 - April 2024