What Are The Tax Compliance Requirements For Foreign Banks in Dubai?

Dubai has been considered as one of the strategic locations for the foreign banks to operate, whereby the banks can tap into the markets of the Middle East, Asia, and Africa easily. This is the reason why there has been a surge in the branches of foreign banks in Dubai, UAE.

Recently there has been a major tax framework that has been implemented in the UAE for the businesses operating in the land, starting from the implementation of CT. That is not the case for the foreign banks; as for the banks, there has been another taxation law that has been introduced by His Highness Sheikh Mohammed bin Rashid Al Maktoum in 2024. This law stipulates the tax rate that would be applicable on the taxable income of the foreign banks and the compliance requirements that must be followed.

What Are The Key Compliance Requirements For Foreign Banks in Dubai?

Some of the major compliance requirements as per the law include the following, which must be kept in mind by the foreign banks:

Tax rate: As per the law, the tax rate that would be charged on the taxable income of the foreign banks would be 20%. If the foreign banks are registered under the corporate tax regime, then the CT paid under the regime would be deducted from the above-said percentage, and the balance would be payable.

Taxable income calculation: The law also gives the instructions regarding the calculation of the taxable income, which includes the calculation of joint revenues and expenses, losses, or gains that are unrealized from the income or profits, which might be excluded from the financial statements.

Tax return filing: The taxable entities must file the tax returns to the authorities as per the format provided by the authority. As per the law, it must include the financial statements and the clarifications, the amount of the tax due for the specified tax period that has ended, the amount of tax imposed, and the amount of tax paid under the corporate tax regime. These are major details to include, or else the return filing would be rejected. Along with that, the financial statements of the banks must be audited by external auditors.

Voluntary declaration: If the taxpayer becomes aware that the tax return that has been filed to the authority has some errors or mistakes, then the taxpayer must correct the same by providing a voluntary declaration and also making the payment for the differences, if any, within the 30 days of being aware of the issue.

Tax audit: The authority may conduct the tax audit on the taxable entity for which the notification would be provided 5 days prior to the audit in order to ensure the compliance with the tax laws and to detect tax evasions, if any.

Objection to the tax amount of the penalty imposed: The taxable persons have the right to file for the object, if any, on the tax amount stated by the authority to be paid or the fine imposed, within 20 days of getting the notification of the above-said tax amount or fine.

Tax evasion: If the taxpayer has evaded any tax amount, that would lead to serious penalties, which would be around twice the amount of tax not paid. Also, if any delay is made in the payment of taxes or fines imposed, then that would attract a 2% fine on the unpaid amount for each month delayed.

How to Cope With the Changes in The Tax Environment in UAE?

The tax environment in the UAE has been changing rapidly to make itself more attractive and stringent to avoid any tax evasions. The taxable entities, along with the foreign banks, must stay updated to ensure the compliance and to make the tax payments on time. Even though the regulatory framework is stringent, the foreign banks can still enjoy various benefits if they stay updated with the tax regimes. Approaching the professional tax consultants like CDA is one of the options that could enable the foreign banks to get more insights regarding the tax laws.

How Can CDA’s Tax Team Assist?

The professional tax team at CDA always stays updated regarding the laws and the tax regimes prevailing in the UAE, enabling them to make strategies for their clients beforehand and enabling them to stay compliant. The experts from CDA would enable the foreign banks to save the costs on penalties and also to get the tax framework sorted. The team will also assist during the tax audits by the authorities by helping in maintaining all the required documents.

To know more about the tax services provided by CDA, connect with us now.

Mitesh Maithia

Tax Manager

Mitesh is a Tax Professional with expertise in direct, indirect, and international taxation, including transfer pricing, since 2018. Passionate about making complex tax matters simple, he shares insights to help businesses stay compliant and forward-looking.