Dubai has introduced a 20% levy on the earnings of foreign banks operating within the emirate. The advisory measure was announced by Sheikh Mohammed bin Rashid Al Maktoum, who serves as the Ruler of Dubai and the Prime Minister of the UAE, according to the Dubai government’s press service. The decision signals a significant shift in how international financial institutions are taxed in Dubai and reflects the city’s ongoing efforts to align its fiscal framework with broader national policies.
The new tax will apply to all foreign banks doing business in Dubai, including those operating from the city’s many free zones. A notable exception is banks that are licensed to operate within the Dubai International Financial Centre, which will remain exempt from this obligation. This carve-out highlights the special status of the DIFC as a global financial hub with its own regulatory and fiscal regime, separate from the rest of the emirate.
When a foreign bank is already subject to a 9% corporate tax, this amount will be deducted from the total tax liability under the new framework. The government emphasized that the federal corporate income tax and the tax on the activities of foreign banks are not additive; rather, they interact within a structured tax system to determine the final amount owed. This approach aims to create clarity in taxation for multinational lenders and to prevent double counting across different levels of taxation.
Penalties for non-compliance are outlined to deter violations of the new rule. A first violation carries a fine of up to 500,000 dirhams, which underscores the seriousness with which the authorities view enforcement. If a breach recurs within two years, the penalty can escalate to as much as 1 million dirhams in compensation. The framework also includes procedures for verification and assessment to ensure that penalties are proportionate and properly applied, maintaining confidence in Dubai’s regulatory environment.
Beyond the tax development itself, Dubai continues to attract investment by refining its business climate. Recent changes in visa and residency policies have been linked by industry observers to a rise in demand for commercial space, reflecting heightened activity from international firms seeking a stable base in the emirate. This broader policy context suggests that Dubai remains focused on balancing fiscal measures with incentives that support sustained growth in finance, trade, and services across the region.