[World Tax News] Dubai Introduces 20% Annual Tax on Foreign Banks and More

Editorial Team – [2024] 160 taxmann.com 413 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week.

1. Dubai introduces 20% annual tax on foreign banks

Mohammed bin Rashid, the ruler of Dubai, has introduced a law regarding the tax on foreign banks, which applies to all foreign banks operating in the emirate, including special development zones and free zones. However, foreign banks licensed to operate in the Dubai Financial Center are excluded from its provisions for the income they achieve from conducting their business within or through the centre.

The law stipulates that an annual tax of 20% shall be imposed on foreign banks on taxable income; however, if the foreign bank pays the tax under the Corporate Tax Law in accordance with Federal Decree Law No. (47) of 2022, this percentage shall be reduced by the corporate tax rate applied.

The law regulates the rules for calculating taxable income, the controls for submitting the tax return and paying the tax, the procedures for auditing the tax return and voluntary declaration, and the duties and procedures related to the tax audit process. The law specifies the rights of the person subject to tax audit, which is the foreign bank and its branches licensed by the Central Bank of the United Arab Emirates to operate in the Emirate of Dubai.

Source: Post by Dubai Media Office

2. UAE publishes corporate tax guide on taxation of partnerships

The Ministry of Finance, UAE, has released a corporate tax guide on partnership taxation. The guide is designed to provide general guidance on the taxation of partnerships. It provides the following:

(a) A general understanding of how the Corporate Tax Law treats partnerships,

(b) Information about how the Corporate Tax Law applies to a partnership and its partners, including special provisions that apply to partnerships and the tax treatment of commonly occurring events and

(c) Information regarding the registration, filing requirements, compliance and other tax obligations related to partnerships and partners.

The guide should be read by persons carrying on a business in the UAE with other persons through a partnership arrangement, trust, or any other similar association between persons.

The guide also enlists tax treatment of foreign partnerships and distributive share of any partners’ income from such Foreign Partnership.

Source: Corporate Tax Guide on Taxation of Partnerships

3. Germany releases catalogue of territories for the exchange of financial account data

The German Federal Central Tax Office has released a list of participating territories for the Common Reporting Standard (CRS) in 2024, covering 2023. The list comprises 116 jurisdictions, with Aruba, Georgia, Kenya, Liberia, Moldova, Montenegro, Thailand, Uganda, and Ukraine being recent additions. Financial institutions must submit the necessary CRS data in Germany by July 31, 2024.

Source: Final List Of Participating States

4. Capital gain tax exemption on disposal of capital assets situated outside Malaysia provided to Residents

On March 4, 2024, Malaysia released the Income Tax (Exemption) (No. 3) Order 2024 in the Official Gazette. The order grants a capital gains tax exemption to companies, limited liability partnerships, trust bodies, and cooperative societies resident in Malaysia for gains derived from the disposal of capital assets located outside Malaysia.

To qualify for this exemption, recipients must satisfy specific conditions, including meeting economic substance requirements such as maintaining an adequate number of employees and investing sufficiently in operations within Malaysia. However, the exemption does not extend to gains from the sale of intellectual property rights, nor does it apply to entities engaged in banking, insurance, air transport, or sea transport businesses.

The exemption from capital gains tax is effective from January 1, 2024, until December 31, 2026, matching the expiration date of certain foreign-source income exemptions implemented in 2022.

Source: Income Tax (Exemption) (No. 3) Order 2024