The Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (Corporate Tax Law) was published by the UAE on 09 December 2022 and it provides for the introduction and implementation of a Federal Corporate Tax in the UAE. The Corporate Tax Law is effective for financial years starting on or after 1 June 2023.

Under the Corporate Tax Law, a branch of a non-resident person could be regarded as a Permanent Establishment in the UAE and the income attributable to such branch could be subject to tax in the UAE. This would include branches of foreign banks in the UAE. In terms of the Corporate Tax Law, branches of foreign banks would be taxed at the standard corporate tax rate of 9%, unless the free zone tax incentives or other exemptions apply.

As it currently stands, in certain Emirates, branches of foreign banks are governed by special banking tax decrees, under which they are taxed at 20% of their adjusted taxable income.
The interaction between the Corporate Tax Law and regulations by special banking decrees are unclear at this stage. Could there be a difference in the tax treatment between local UAE banks and branches of foreign banks?

It is important to note that tax laws and regulations in the UAE can be complex and may require expert advice to ensure compliance. It is crucial for businesses to stay up to date with the latest developments and seek professional advice to navigate these complexities. Global Tax Services will be able to assist you with any questions on this matter.