The UAE banking sector is entering a new era of transparency and global alignment in 2025. With the full implementation of the UAE’s federal corporate tax and new Emirate-level laws targeting foreign banks, compliance is more complex-but also more clearly defined-than ever before. Whether you’re a local bank, a branch of a foreign institution, or a finance professional, understanding these tax rules is essential for risk management and strategic growth.
This guide explains the latest tax compliance requirements for UAE banks in 2025, using clear language and real-world examples to help everyone stay on the right side of the law.
- The 9% Federal Corporate Tax: Who Must Pay?
Who Is Subject to Corporate Tax?
Since June 2023, the UAE has imposed a 9% corporate tax on taxable profits above AED 375,000. By 2025, this applies to:
– All mainland banks: Both local and foreign banks operating in the UAE, except where Emirate-level laws apply (see below).
– Free zone banks: Qualifying free zone entities may benefit from a 0% tax rate on qualifying income, but non-qualifying income is taxed at 9%.
– Foreign banks with a permanent establishment: Must pay tax on UAE-sourced income.
– Individuals running banking businesses: If annual income exceeds AED 1 million, registration is required by March 31, 2025, or a AED 10,000 penalty applies.
Example:
A UAE-based bank earns AED 2 million in taxable profit in 2025. The first AED 375,000 is exempt; the remaining AED 1,625,000 is taxed at 9%, leading to a tax bill of AED 146,250.
- Special Tax Rules for Foreign Banks in Dubai
New Emirate-Level Tax Law
From January 2024, Dubai introduced a 20% Emirate-level tax on the taxable income of foreign banks operating in the Emirate. This new law:
– Applies to all foreign banks in Dubai, including those in special development and free zones (but not to income earned within or through DIFC).
– Allows a tax credit: Foreign banks can offset the 9% federal corporate tax paid against their 20% Dubai tax liability, avoiding double taxation.
– Clarifies taxable income: The calculation follows the UAE corporate tax law, with additional rules for shared revenues, head office expenses, and unrealized gains/losses.
Example:
A foreign bank’s Dubai branch earns AED 10 million in taxable profit.
– Federal corporate tax due: 9% of AED 10 million = AED 900,000
– Dubai Emirate tax due: 20% of AED 10 million = AED 2,000,000
– Less credit for federal tax paid: AED 2,000,000 – AED 900,000 = AED 1,100,000 payable to Dubai.
Filing and Payment Deadlines
– Tax returns: Must be filed within nine months of the end of the tax period.
– Tax payments: Due within three months after the tax period ends.
– Documentation: Banks must provide supporting evidence for tax credits and maintain a certified register for deferred tax assets.
- The 15% Minimum Tax for Large Multinational Banks
From January 2025, the UAE implements the Domestic Minimum Top-Up Tax (DMTT), aligned with the OECD’s Pillar Two rules. This applies to:
– Multinational banking groups with global revenues above €750 million.
– If the UAE effective tax rate is below 15%, a top-up tax is due to reach the minimum.
Example:
A global bank’s UAE branch taxed at 9% must pay an additional 6% to reach the 15% minimum, if it meets the revenue threshold.
- Key Compliance Steps for UAE Banks
Registration
– Register with the Federal Tax Authority (FTA) via the EmaraTax portal within the stipulated timeline.
– Foreign banks must also comply with Dubai’s Department of Finance requirements.
Record-Keeping
– Maintain all financial records supporting tax liability for at least seven years after the end of the tax period.
– Keep a certified register for deferred tax assets and supporting documents for all tax credits.
Filing Returns
– Federal corporate tax returns: File within nine months from the end of the tax period.
– Dubai Emirate tax returns: File within nine months, aligning with federal deadlines for simplicity.
Payment
– Federal tax: Pay via the EmaraTax portal within nine months of the tax period’s end.
– Dubai Emirate tax: Pay within three months after the tax period, after offsetting federal tax paid.
- Calculation of Taxable Income
– Follow UAE corporate tax law for taxable income calculation.
– For foreign banks, apply additional rules for shared revenues, head office expenses, and regional management costs as specified by Dubai’s Department of Finance.
– Unrealized gains/losses and non-income statement profits are treated according to the new law.
- Avoiding Double Taxation
– Foreign banks can offset federal corporate tax paid against Dubai Emirate tax with proper documentation.
– This ensures banks are not taxed twice on the same income, aligning with international best practices.
- Common Mistakes and How to Avoid Them
– Late registration or filing: Results in automatic penalties (AED 10,000 for late registration).
– Incorrect calculation of taxable income: Can lead to disputes and additional tax assessments.
– Missing documentation for tax credits: May result in denied credits and double taxation.
– Failure to align tax periods: Banks can apply to align Dubai and federal tax periods for easier compliance.
- Real-World Example: A Foreign Bank’s Compliance Journey
Scenario:
A UK-based bank has a Dubai branch earning AED 15 million in 2025.
– Registers for federal corporate tax and Dubai Emirate tax.
– Calculates federal tax: 9% of AED 15 million = AED 1,350,000.
– Calculates Dubai Emirate tax: 20% of AED 15 million = AED 3,000,000.
– Offsets federal tax: AED 3,000,000 – AED 1,350,000 = AED 1,650,000 due to Dubai.
– Files both tax returns within nine months, pays Dubai tax within three months after the tax period.
– Maintains all documentation and a deferred tax asset register for audit readiness.
- Practical Tips for UAE Banking Tax Compliance
– Register early for both federal and Emirate-level taxes.
– Align tax periods to streamline compliance and avoid confusion.
– Use accounting software for accurate record-keeping and tax calculations.
– Consult a tax advisor for complex group structures, transfer pricing, or cross-border operations.
– Stay updated on FTA and Dubai Department of Finance announcements for regulatory changes.
Conclusion
Tax compliance for the UAE banking sector in 2025 is more demanding but also more transparent, thanks to clear federal and Emirate-level rules. By understanding the 9% federal corporate tax, the 20% Dubai Emirate tax for foreign banks, and the new 15% minimum for multinationals, banks can avoid penalties, optimize their tax positions, and focus on growth.
Key Takeaways:
– Register for federal corporate tax (9% on profits above AED 375,000).
– Foreign banks in Dubai face a 20% Emirate tax, with credit for federal tax paid.
– File all returns and pay taxes on time to avoid penalties.
– Maintain detailed records and supporting documentation.
– Consult experts for complex compliance scenarios.
For tailored advice or a compliance review, consult a certified UAE tax consultant. Proactive compliance is your best strategy for long-term success in the UAE’s dynamic banking sector.
