Dubai Issues Administrative Resolution No. 107 of 2024: Guidance on the Taxation of Foreign Banks operating in the Emirate of Dubai

In an important development furthering the framework established under Dubai Law No. 1 of 2024 governing the taxation of foreign banks operating within the Emirate of Dubai (the “Dubai Law”), the Dubai Department of Finance (the “Department”) has introduced Administrative Resolution No. 107 of 2024 (the “Resolution”).
This Resolution, effective as of its publication in the official gazette on 9 December 2024, provides detailed clarifications on the implementation of the Dubai Law, particularly with respect to the determination, computation, and discharge of tax liabilities for foreign banks operating in Dubai.

Key Provisions of the Resolution

Tax Period Alignment and Modifications

The Resolution affirms that the inaugural tax period for foreign banks under the Dubai Law commenced on 1 January 2024. It further stipulates that the standard tax period for calculating taxable income and associated liabilities shall coincide with the calendar year, spanning from 1 January to 31 December. Recognizing, however, that certain foreign banks may operate under alternative fiscal years for accounting purposes, the Resolution permits such entities to apply to the Department for an adjustment of their tax period. Approval of such applications may be subject to conditions imposed by the Department.

Interaction with Federal Corporate Tax Law

The Resolution reinforces the principles of credit and deduction articulated in the Dubai Law, ensuring that foreign banks can claim adjustments for tax liabilities discharged under the Federal Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the “Corporate Tax Law”).
Notably, the Corporate Tax Law imposes a standard rate of 9%. To avail themselves of such adjustments, foreign banks operating in Dubai must present documentary evidence substantiating the payment of Corporate Tax. This provision underscores the importance of maintaining records to safeguard claims for tax relief for any tax liabilities discharged under the Corporate Tax Law.

Detailed Tax Computation Rules

The Resolution offers granular guidance on the computation of tax liabilities, including provisions addressing:
Revenue and Expense Allocation: Detailed mechanisms for calculating shares of revenues and associated expenses.
Management Expenses: Deductibility of management costs.
Unrealized Gains and Losses: Treatment of gains and losses not yet realized within the fiscal year.
Credit Losses: Recognition of both existing and anticipated credit losses in the tax computation.

Payment and Filing Deadlines

Foreign banks must pay the tax liabilities to the Department within three months following the close of the tax period, assuming prior payment of tax under the Corporate Tax Law.

Tax returns, accompanied by requisite supporting documents, must be filed within nine months of the tax period’s conclusion. This submission must bear the approval of the designated officer at the taxable entity as well as an external auditor.

Concluding Observations

In conclusion, the Resolution outlines the procedures for calculating and reporting taxes for foreign banks operating in the Emirate of Dubai. By following these guidelines, foreign banks can effectively manage their tax obligations under the Dubai Law and Corporate Tax Law.

For further advice on tax applicable to foreign banks operating in Dubai as well as corporate tax, please contact our Senior Associate Faizan Daud at [email protected]

 

Faizan Daud Senior Associate [email protected]