Dubai's new law mandating a 20 per cent annual tax on foreign banks operating in the emirate, is expected to be positive for lenders and help them avoid paying double taxes, according to experts.
Under a law announced last week, foreign banks are subject to the tax on their annual taxable income. However, if they pay corporate tax, that rate will be deducted from the annual 20 per cent tax.
The law applies to all foreign banks operating in Dubai, including in special development zones and free zones, except for lenders licensed to operate in the Dubai International Financial Centre.
“There is a lot of misconception in the market around the announcement and, more specifically, whether foreign banks now need to bear an ‘additional’ 20 per cent emirate level corporate tax cost in addition to the recently introduced 9 per cent federal level corporate tax regime,” Vishal Sharma, managing director with Alvarez & Marsal Tax, Dubai told The National.
“However, the reality is that there has been an emirate-level corporate tax regime for foreign banks operating in the mainland for years now in the UAE and all foreign banks operating in such manner have been paying a 20 per cent corporate tax on their profit in the respective emirate they were operating in.”
The new law is “seeking to help these banks by clarifying that they will not be subject to double corporate taxes now that a federal corporate tax has been introduced, by essentially extending a credit of 9 per cent corporate tax they will now have to pay under the federal level corporate tax regime against the 20 per cent they already had to pay under the emirate level corporate tax regime”, he said.
The UAE introduced the federal corporate tax with a standard statutory rate of 9 per cent starting from the financial year beginning on or after June 1.
It brought the income of companies exceeding Dh375,000 ($102,110) within the taxable bracket. Taxable profits below that level will be subject to a tax of zero per cent.
Several exemptions are also offered for businesses operating in strategic sectors.
The new Dubai banking tax regulations “will provide welcome relief to foreign banks operating in Dubai through branches”, Nilesh Ashar, senior managing director and head of tax for Middle East at FTI Consulting, said.
“While under the existing regulation, all foreign bank branches in Dubai were taxed at the rate of 20 per cent on their profits, the recent introduction of corporate tax in the UAE at 9 per cent meant that Dubai-based foreign banks could have ended up paying tax under both the Dubai banking law and the federal corporate tax law at effectively 29 per cent with no ability to offset taxes paid under either legislation.”
The regulation helps lenders operating in Dubai to claim a deduction in respect of any taxes paid under the UAE corporate tax regulation, on a proportionate basis, he added.
Junaid Ansari, director of investment strategy and research at Kamco Invest, said the new regulation will improve the oversight of banks operating in the emirate.
“The financial impact on banks is expected to be minimal as the existing corporate tax would be deducted from the new tax,” he said.
Mr Sharma, however, said that while the announcement is positive for the banks, there are still a lot of questions which would need to be monitored, “such as how the credit regime will work in practice”.
The new law also announces penalties for breaches, including fines up to Dh500,000, the Dubai Media Office said.
The fine will be doubled in case of repeat breaches within two years, up to a maximum of Dh1 million.
Banks will need to consider the compliance requirements under the new law and “ensure they are ready to deal with these alongside the requirements under the corporate tax law”, Rachel Fox, partner at Clyde & Co, said.
Uefa Nations League: How it works
The Uefa Nations League, introduced last year, has reached its final stage, to be played over five days in northern Portugal. The format of its closing tournament is compact, spread over two semi-finals, with the first, Portugal versus Switzerland in Porto on Wednesday evening, and the second, England against the Netherlands, in Guimaraes, on Thursday.
The winners of each semi will then meet at Porto’s Dragao stadium on Sunday, with the losing semi-finalists contesting a third-place play-off in Guimaraes earlier that day.
Qualifying for the final stage was via League A of the inaugural Nations League, in which the top 12 European countries according to Uefa's co-efficient seeding system were divided into four groups, the teams playing each other twice between September and November. Portugal, who finished above Italy and Poland, successfully bid to host the finals.
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KILLING OF QASSEM SULEIMANI
How to become a Boglehead
Bogleheads follow simple investing philosophies to build their wealth and live better lives. Just follow these steps.
• Spend less than you earn and save the rest. You can do this by earning more, or being frugal. Better still, do both.
• Invest early, invest often. It takes time to grow your wealth on the stock market. The sooner you begin, the better.
• Choose the right level of risk. Don't gamble by investing in get-rich-quick schemes or high-risk plays. Don't play it too safe, either, by leaving long-term savings in cash.
• Diversify. Do not keep all your eggs in one basket. Spread your money between different companies, sectors, markets and asset classes such as bonds and property.
• Keep charges low. The biggest drag on investment performance is all the charges you pay to advisers and active fund managers.
• Keep it simple. Complexity is your enemy. You can build a balanced, diversified portfolio with just a handful of ETFs.
• Forget timing the market. Nobody knows where share prices will go next, so don't try to second-guess them.
• Stick with it. Do not sell up in a market crash. Use the opportunity to invest more at the lower price.
Zayed Sustainability Prize
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The biog
Age: 35
Inspiration: Wife and kids
Favourite book: Changes all the time but my new favourite is Thinking, Fast and Slow by Daniel Kahneman
Best Travel Destination: Bora Bora , French Polynesia
Favourite run: Jabel Hafeet, I also enjoy running the 30km loop in Al Wathba cycling track
The 12 Syrian entities delisted by UK
Ministry of Interior
Ministry of Defence
General Intelligence Directorate
Air Force Intelligence Agency
Political Security Directorate
Syrian National Security Bureau
Military Intelligence Directorate
Army Supply Bureau
General Organisation of Radio and TV
Al Watan newspaper
Cham Press TV
Sama TV
BMW M5 specs
Engine: 4.4-litre twin-turbo V-8 petrol enging with additional electric motor
Power: 727hp
Torque: 1,000Nm
Transmission: 8-speed auto
Fuel consumption: 10.6L/100km
On sale: Now
Price: From Dh650,000
Why seagrass matters
- Carbon sink: Seagrass sequesters carbon up to 35X faster than tropical rainforests
- Marine nursery: Crucial habitat for juvenile fish, crustations, and invertebrates
- Biodiversity: Support species like sea turtles, dugongs, and seabirds
- Coastal protection: Reduce erosion and improve water quality
The specs: 2018 BMW R nineT Scrambler
Price, base / as tested Dh57,000
Engine 1,170cc air/oil-cooled flat twin four-stroke engine
Transmission Six-speed gearbox
Power 110hp) @ 7,750rpm
Torque 116Nm @ 6,000rpm
Fuel economy, combined 5.3L / 100km
UAE currency: the story behind the money in your pockets
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UAE currency: the story behind the money in your pockets
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Company%20Profile
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Tuesday's fixtures
Kyrgyzstan v Qatar, 5.45pm
Scoreline
Australia 2-1 Thailand
Australia: Juric 69', Leckie 86'
Thailand: Pokklaw 82'
COMPANY%20PROFILE
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How to improve Arabic reading in early years
One 45-minute class per week in Standard Arabic is not sufficient
The goal should be for grade 1 and 2 students to become fluent readers
Subjects like technology, social studies, science can be taught in later grades
Grade 1 curricula should include oral instruction in Standard Arabic
First graders must regularly practice individual letters and combinations
Time should be slotted in class to read longer passages in early grades
Improve the appearance of textbooks
Revision of curriculum should be undertaken as per research findings
Conjugations of most common verb forms should be taught
Systematic learning of Standard Arabic grammar
