Taxation of Foreign Banks in UAE CT Rules & Guidance

Taxation of Foreign Banks under UAE Corporate Tax Rules

The UAE government has made new rules about the taxation of foreign banks. The new rules started on March 8, 2024, when His Highness Sheikh Mohammed bin Rashid Al Maktoum signed Law No. (1) of 2024. These rules set how foreign banks pay corporate tax in the UAE. It is very important for foreign banks and people who want to invest in UAE banks to understand these rules. In this article, I will explain how these tax laws work, what banks must do, and how a professional firm like Mubarak Al Ketbi (MAK) Auditing can help.

Understanding How UAE Taxes Foreign Banks

Let’s talk about how foreign banks are taxed under the UAE’s corporate tax regime. You need to look at details like what the bank does in the UAE, if there are tax treaties, and how the tax rate works. Every foreign bank must check its activities and understand what rules apply to it.

Here are some key points:

• The UAE charges foreign banks a 20% tax on their taxable income.
• Banks can get credit for any UAE corporate tax paid.
• If a foreign bank does business in the UAE, it will probably have to pay this tax.

Main Considerations for Foreign Banks in the UAE

Foreign banks must follow the UAE’s tax rules and avoid mistakes. Good understanding will keep the bank safe and help them avoid fines.

Key things to consider:

• Know the Law & Tax Rate:
  All foreign banks in the UAE are taxed at a 20% rate on taxable income. The law also allows banks to use tax credits, so they don’t get taxed twice if they pay tax somewhere else.
• How To Calculate Taxable Income:
  Foreign banks need to know what money counts as taxable income and what expenses they can subtract. They must follow UAE tax rules for this, and they should use transfer pricing if they deal with related companies.
• Tax Returns & Payment:
  Banks must file tax returns by the deadlines set by the Department of Finance (DOF). These must include:
  • The official tax return form,
  • Financial statements,
  • List of taxes paid,
  • Documents for all deductions and credits.
• Keep Good Records:
  Banks should keep good records to be ready for tax audits. The FTA can check these records for up to 5 years (or 15 years if there’s tax evasion).
• Understand Activities:
  Different banking activities can be taxed differently. For example, Islamic banking might follow special rules. Every bank must know what counts as taxable income for its activities.
• Audit Preparation:
  Foreign banks must be ready for audits from the UAE tax authorities. If the tax office asks for an audit, the bank has 20 days to object after getting results, but only if it meets all requirements.

Bullet Points: Main Tax Tips for Foreign Banks

• All foreign banks must register and pay corporate tax if they have UAE business.
• The tax rate is 20% for taxable income in the UAE.
• Banks must keep detailed records of money made and expenses.
• All returns and payments must follow strict UAE deadlines.
• The FTA can audit foreign banks and check their books.

Always check if your activity has a special rule (for example, Islamic banking).

Why Choose Mubarak Al Ketbi (MAK) Auditing?

Mubarak Al Ketbi (MAK) Auditing can help foreign banks understand and follow all UAE tax laws. Our expert team knows the ins and outs of the new tax rules. Here’s how we can help you:

• We check if your foreign bank must pay UAE corporate tax.
• We calculate your taxable income and find all allowed deductions.
• We explain transfer pricing for related-company transactions.
• We help you file your tax return on time and keep your records straight.
• We prepare your bank for a tax audit and guide you in objecting if needed.
• We keep you up-to-date with changes in UAE tax laws and tell you how these changes affect your business.

As the saying goes, we’ll help you avoid “barking up the wrong tree” when it comes to tax problems!

For More Information – Mubarak Al Ketbi (MAK) Auditing

If you need help with corporate tax in the UAE, Mubarak Al Ketbi (MAK) Auditing is here for you.

• For more information visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
• Or contact/WhatsApp on this number: +971 50 276 2132