New Emirate Law Issued for Foreign Banks Based in Dubai

27 March 2024 – On 8 March 2024, H.H. Sheikh Mohammed Bin Rashid Al Maktoum, the Ruler of Dubai, published Law No. (1) of 2024 concerning the Taxation of Foreign Banks Operating in the Emirate of Dubai, United Arab Emirates (UAE) (“the new Emirate Law”).

This new Emirate Law became effective on the date of its publication in the Official Gazette, i.e., 8 March 2024, and is set to replace the previous Regulation No. (2) of 1996 for the Assessment of Tax on Branches of Foreign Banks Operating in the Emirate of Dubai (“the Old Law”).

According to the new Emirate Law, a tax will continue to be imposed on all foreign banks operating through their various branches in the Emirate of Dubai, which are licensed by the Central Bank of the UAE (“CBU”). Accordingly, foreign banks will remain subject to a 20% tax on their annual taxable income (“Emirate-level tax”) under the new Emirate Law.

As an exception, branches of foreign banks that are licensed to operate in the Dubai International Financial Centre (“DIFC”), governed by the Dubai Financial Services Authority (“DFSA”), will continue to be excluded from the levy of Emirate-level tax.


Brief Overview of the Old Law

Under the Old Law, each branch of a foreign bank operating in the Emirate of Dubai was subject to an Emirate-level tax at a rate of 20% on its taxable income. This taxable income is calculated in accordance with the accounting policies adopted by the respective branch, with necessary adjustments made as per guidelines in the Old Law. A tax declaration, reflecting the computation of taxable income for a fiscal year which is duly certified by external auditors, is required to be filed with the Department of Finance (“DoF”), accompanied by the audited financial statements of the respective branch.

Introduction of Federal Decree-Law No. 47 of 2022 (“Federal CT Law”)

The introduction of the Federal CT Law, concerning the taxation of corporations and businesses in the UAE, brought significant changes:

  • UAE headquartered banks and UAE branches of foreign banks became subject to corporate tax at a rate of 9% (“Federal CT”).
  • According to the Frequently Asked Questions (“FAQs”) issued alongside the Federal CT Law, it was clarified that any Emirate-level tax paid would not be available as a credit against, or otherwise reduce, the amount of Federal CT liability.
  • Consequently, branches of foreign banks operating in Dubai, UAE (excluding those in the DIFC), which were already subject to Emirate-level tax, would now be required to pay an additional 9% Federal CT on top of the existing 20% Emirate-level tax, potentially leading to double taxation.
Relief Introduced Under the New Emirate Law

Previously, the Old Law contained no provision for crediting
taxes paid under the newly introduced Federal CT Law. In response, H.H. the
Ruler of Dubai has provided much-awaited relief to branches of foreign banks
operating in the Emirate of Dubai by allowing a deduction of Federal CT from
the Emirate-level tax payable under the new Emirate Law.

Key Provisions of the new Emirate Law

With the background provided, we have summarized key provisions of the new Emirate Law and important takeaways for your quick reference:

"Taxpayer" according to the new Emirate Law

All foreign banks operating through their various branches in the Emirate of Dubai, which are licensed by the CBU, will be subject to a 20% tax on their annual taxable income.

Guidance on "computation of taxable income"
  • In line with the adjustments prescribed under the Old Law, the new Emirate Law prescribes the following indicative adjustments to be applied when calculating taxable income:
    • Rules and regulations adopted by the Director General of the Department of Finance (“DG”):
      • Centralized/shared revenues and expenses.
      • Head office charges and regional management expenses.
      • Unrealized losses and gains from taxable income.
      • Any profits/incomes not included in the profit and loss account.
      • Any other conditions relevant for computing taxable income.
    • Correlation with Federal CT Law: For adjustments not specifically covered by the new Emirate Law, taxpayers are required to apply general rules for determining taxable income as per the provisions of the Federal CT Law.
    • Accordingly, when computing taxable income according to the new Emirate Law, foreign banks operating in Dubai will also need to consider provisions of the Federal CT Law.
Avoidance of double taxation

The new Emirate Law will allow a deduction (i.e., credit) of Federal CT paid by branches of foreign banks operating in Dubai from the payable amount of its Emirate-level tax. The mechanism for calculating such a tax credit has not yet been specified.

Other key provisions

Outlined below are some key provisions introduced in the new Emirate Law:

  • Administrative and compliance requirements
    • A tax return must be filed with the DG. The format and timelines (including the deadline for tax payment) will be prescribed by the DG in due course.
    • Voluntary disclosure (“VD”) must be filed to rectify an incorrect tax return and/or filings made following a tax assessment.
    • Records and documents must be maintained for a period of 7 years from the end of the relevant tax period.
  • Tax audits
    • Detailed provisions concerning procedures and timelines for tax audits have been introduced.
    • Taxpayers can file:
      • Objections against tax due and penalties levied with the Department of Finance.
      • Appeal against the decision of the higher committee of the Department of Finance before the competent court (unlike the Old Law, where the decision of the Director of H.H. the Ruler’s Court was considered final).
  • Issuance of executive decisions for the implementation of the new Emirate Law:

The DG shall issue necessary rules and regulations to implement the provisions of this new Emirate Law (to be published in the Official Gazette).

  • Penalty provisions


 New Emirate Law  


Tax evasion[1] penalty

Twice the amount of tax evaded


Delay in payment of Emirate-level tax and/or penalty

2% of the amount of unpaid tax or penalty for each month of delay or part


Upper limit on penalties levied

As follows:

- Cannot exceed AED 500,000 per administrative violation.

- Up to 2 times in case of repetition of same violation within 2 years.

Key Takeaways

With the option to deduct Federal Corporate Tax (CT) paid against the tax payable at the Emirate level in Dubai, branches of foreign banks operating in Dubai will not face the burden of Federal CT on their taxable income from operations within Dubai, in addition to the tax at the Emirate level.

Furthermore, the Dubai International Financial Centre (DIFC) branches of foreign banks will be subject to Federal CT only.

Although the deduction of Federal CT paid is available as outlined above, there is currently no specified timeline for the filing of tax returns at the Emirate level under the new Emirate Law. If the filing timeline remains the same as under the Old Law (i.e., the 31st of March following the end of the respective fiscal year), it could pose practical challenges in utilizing the deduction. Therefore, taxpayers must look for further update on this matter. 

As a way forward, to ensure required compliance with the provisions of this new Emirate Law, branches of foreign banks operating in Dubai must:

  • Identify their 1st tax period considering the transitional rules, as follows:

Taxpayers with tax period beginning

 Transitional Timeline  


On or after 8 March 2024

New Emirate Law to apply effective 1st day of the respective tax period


Before 8 March 2024

Old Law would continue to apply for such fiscal year which has already begun


  • Closely monitor for release of decisions by DG for matters requiring further clarity.


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