Dubai introduces new law governing taxation of foreign banks

The Dubai government announced, on 7 March, the introduction of a law for the taxation of foreign banks operating in the Emirate. Dubai Law No. (1) of 2024 replaces Regulation No. (2) of 1996, which previously governed the taxation of foreign banks in Dubai.

The tax, at a rate of 20% on taxable income, applies to all foreign banks operating in Dubai, including special development zones and free zones, with the exception of foreign banks licensed to operate in the Dubai International Financial Centre (DIFC).

Previously foreign banks paid 20% tax in Dubai under the Regulation but the imposition of UAE Federal corporate taxation, which is currently applied at a rate of 9%, from 1 June 2023, there was the potential for foreign banks in Dubai to be subject to double taxation.

Dubai Law No. (1) of 2024 specifies that where a foreign bank pays tax under the UAE’s Corporate Tax Law, a credit will be available for the corporate tax paid, resulting in a tax rate of 11% in Dubai.