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Law No 8 of 2017 On Tax levied on branches of Foreign Banks in Ras Al Khaimah

Law
Law No 8 of 2017 On Tax levied on branches of Foreign Banks in Ras Al Khaimah We, Saud Bin Saqr Bin Mohamed Al Qasimi, Ruler of Ras Al Khaimah After perusal of United Arab Emirates Constitution; - Federal Law No. 10 of 1980 on the Central Bank, as amended; - Federal Law No. 11 of 1992 to issue the Civil Procedures Law, as amended; - Federal Law No. 35 of 1992 to issue the Criminal Procedures Law, as amended; - Federal Law No. 7 of 2017 on Tax Procedures; - Law No. 4 of 2012 called “Law of Government Lawsuits”; - Law No. 7 of 2012 on Incorporation of Ras Al Khaimah Executive Council; - Law No. 8 of 2016 on Regulating the Practice of Economic Activities in Ras Al Khaimah; - Emiri Decree No. 20 of 2003 on Merging Financial Control and Department of Public Accounts in one department called Finance Department; and - Pursuant to the approval of the Executive Council, Have promulgated the following law: Article (1) The following words shall have the following meanings respectively unless context otherwise indicates: “UAE” refers to the United Arab Emirates. “Emirate” refers to Ras Al Khaimah. “Ruler” refers to His Highness Ruler of Ras Al Khaimah. “Government” refers to Ras Al Khaimah Government. “Department” refers to Finance Department in Ras Al Khaimah. “Director General” refers to Director General of Finance Department. “Division” refers to Tax Division in Finance Department; “Branch” refers to a bank unit operating in the Emirate and affiliating a foreign bank. “Tax Base” refers to the branch net profit subject to tax under the provisions of this Law. “Fiscal Year” refers to the year starting in January 1st and ending in December 31st of each calendar year. “Capital Expenditure” refers to the expenses having a capitalism nature and non-operational nature that might be useful in consecutive financial terms. “Regional Administration Expenses” refers to the supervisory expenses of the regional administration existing inside and outside the Emirate. “Central Expenses or Inter-Branches Common Expenses” refers to common operational expenses used to serve all branches operating in the Emirate. “Central Revenues or Inter-Branches Common Revenues” refers to operational revenues resulting from investments and common activities of branches operating inside or outside the Emirate. “Outstanding Interests” refers to the accrued interests of the slow-moving and doubtful debts, which have been set aside from revenues account. “Accounting Policies” refers to the policies applicable on a fixed basis by the foreign branch. The same shall be established on basis of accrual principle pursuant to the International Reporting Standards. “Branch Assets” refers to total assets of the branch without deducting the doubtful debts allocation, the outstanding interests of these debts and any other allocations. “Registration” refers to the measurement performed by the branch to be recorded in the Department for Tax purposes. Article (2) The provisions of this Law shall be applicable to all branches of foreign banks operating in the Emirate. Article (3) A (20%) twenty percent tax out of the branch tax base net shall be levied. Article (4) Branch shall apply for registration before the Division and notify the same of any change therein within no more than (20) twenty working days from the date of obtaining the license or amendment. Director General, under a resolution therefrom, shall determine the procedures related thereto. Article (5) Tax Base shall be calculated pursuant to the accounting policies followed by the foreign branch and be approved by external auditors of the branch after carrying out necessary amendments pursuant to the following rules: A. For tax purposes, expenses of the head office shall be substantiated and registered to reflect the base of distributing these expenses and certified by the auditors of the head office; B. Branch shall incur the regional administration expenses on a pro rata of its assets to the total assets of the branches operating inside or outside the UAE which are covered by these expenses; C. Expenses of the head office and the regional administration collectively may not exceed 2.5% of the total revenues of the branch after excluding inter-branches received and paid interests inside the Emirate; D. Branch shall incur the central and common expenses on a pro rata of its assets to the assets of the branches inside and outside the UAE; E. The branch proportion shall be calculated out of the net central and common revenues on basis of the percentage of the branch assets to total assets of the branches included in these revenues; F. General and contingency allocations are not deemed due deductible expenses for tax purposes. Allocations specified for the customers’ doubtful accounts may be allowed. However, the allocation shall be deemed specified if the same belongs to a specific doubtful and totally or partially unguaranteed debt and all evidence indicates non-possibility to collect it totally or partially; G. Outstanding interests may be deducted if the same belongs to unguaranteed debt without any movement thereon and all evidence indicates non-possibility to collect it totally or partially; H. The total value of fixed assets and capital expenditure may not be fully deducted at the same year wherein purchase or disbursement occurred. However, these assets shall be depreciated and these expenses shall be amortized within reasonable term of years, as is recognized between banks; I. Bank transactions between the branch and the head office or the other branches inside and outside the UAE including interests and received or paid commissions shall be calculated on basis of inter-banks prevailing interest rates of different currencies in addition to the applicable and recognized bank standards concerning currencies and other fees; J. Branch loss of any fiscal year may be carried over to the consecutive year provided that the same shall be discounted from its profits for the purposes of calculating tax base. However, the remaining part, if any, shall be carried over only to a second year. No loss realized in any year may be deducted from the profits of the previous years; and K. Branch must follow the accounting policies pursuant to the International Reporting Standards. Article (6) The branch shall keep records of its accounting business, books and any documents or information related to tax and maintain the same for (5) five years consecutive to the tax accrual. Article (7) Tax declaration, data, information and records related to tax, to be submitted to the Division, shall be submitted in Arabic and Division may accept data and documents related to tax in any other language provided that the branch is committed to provide an Arabic translation thereof to the Division on its account and responsibility, if requested. Article (8) Within (90) ninety days from the date of fiscal year expiry, branch shall submit tax declaration; signed by its legal representative, approved by external auditors and attached thereto its audited financial statements, to the Division wherein tax base of the relative fiscal year shall be reflected. However, the branch must pay tax reflected in declaration within that period. Article (9) If branch business is liquidated, tax declaration about its business during the year wherein the same ceased up to the date of cessation shall be submitted within (90) ninety days from the date of cessation pursuant to the rules of annual report submission. Article (10) Division may audit tax declaration submitted by the branch and examine all books, papers and records for verification. In this regard, Division may obtain original records or a copy thereof; rectify or amend the declaration; and claim tax differences accrued from the branch after amendment or rectification. Article (11) Division has the right to audit all books, records and papers of the branch in case of non-submitting the tax declaration on time specified. Moreover, Division may issue approximate tax adjustment, if auditing fails for a reason related to the branch. Article (12) 1. Division shall issue tax adjustment wherein accrued tax, to be notified to the branch, shall be prescribed If, after auditing, it is established that a tax exceeds statements in the declaration is accrued or the declaration is not submitted. This adjustment may not be conducted after (5) five years from the end of the fiscal year for which the tax is accrued and this adjustment data shall be determined under a resolution from the Director General; and 2. If tax evasion is established, Division has the right to conduct tax adjustment within (15) fifteen years from the end of the fiscal year during which the evasion has been committed. The same provision shall apply in case of non-registering the branch with the Division provided that such period shall commence from the date on which the branch should have been registered. Branch shall pay the tax of which an adjustment has issued within (20) twenty working days from the date of its notification. Article (13) 1. Branch may apply to the Division to reconsider any resolution issued thereby. This application must be substantiated and be applied within (10) ten working days from the date of notifying the resolution thereto; 2. Division shall examine the application of reconsideration that meets requirements, conclude a substantiated resolution thereon within (20) twenty working days from the date of receipt and notify the branch with its resolution within (5) five working days from the date of issuing the same; and 3. Branch is entitled to challenge resolutions issued by the Division before the committee examining the tax objections within (10) working days from notifying the same thereto and the challenge shall be recorded in the register maintained for that purpose. Article (14) Under a resolution from the Director General, a committee shall be established from a head, who is a non-division staff and two tax expert members to examine tax objections arising from the application of the provisions of this Law. An employee, authorized thereby shall be appointed as a secretary of the Committee. Article (15) The Committee, holding confidential meetings, shall convene in headquarter of Finance Department or any other place, if necessary. Resolutions thereof, adopted by majority of members’ votes, shall be substantiated and signed by the Head and Secretary within no more than (5) five working days from the date of their issuance. Article (16) 1. Committee shall examine the objection submitted thereto within (30) thirty working days from the date receipt and notify the branch and the Division of its resolution within (10) ten working days from the date of its issuance. The branch shall pay the accrued tax pursuant to this resolution within (20) twenty working days; and 2. In all case, no tax disputes lawsuits shall be admitted before the competent court unless the same is objected initially before the Committee. Article (17) Resolutions issued by the Committee shall be deemed a writ of execution even if they are objected. The same shall be executed by the Execution Judge before the competent court pursuant to the Civil Procedures Law applicable in the UAE. Article (18) Both government and branch have the right to object the Committee’s resolution before the plenary circuit of the First Instance Court within (20) twenty working days from the date of notice on resolution if the value of the tax difference accrued thereby and the penalties exceed (AED 100,000/-) one hundred thousand dirhams. This objection is excluded from the permission to file a lawsuit, which is prescribed in the Law of Government Lawsuits No. 4 of 2012. Article (19) If the branch failed to pay the accrued tax or administrative penalties within the term prescribed in this Law, the following procedures shall be taken against: 1. Division shall serve the branch a notice to pay the accrued tax and administrative penalties within (20) twenty days from serving the notice thereto; 2. After serving the notice, if the branch fails to pay, Director General shall issue a resolution, served to the branch and attached thereto tax and penalties adjustments, to oblige the same to pay the accrued tax; and 3. Resolution of Director General issued pursuant to the provision of the abovementioned clause is deemed a writ of execution to be executed by the Execution Judge in the competent court. In all cases, the accrued tax and administrative penalties notified to the branch are not time-barred. Article (20) Branch is entitled to refund all amounts paid in excess of the accrued tax under an application submitted to the Division subject to the following: 1. Division shall refund the excess paid amounts pursuant to the controls and procedures developed thereby; 2. Division shall offset the amount to be refunded and any other tax amounts or administrative penalties accrued on the branch; and 3. Division is entitled to non-refund the amount if other disputable tax amounts were established. Article (21) Tax Auditors in the Division shall have the capacity of judiciary officers while establishing violations committed in contradiction to the provisions of this Law. Article (22) Branch shall be levied an administrative penalty of (AED 5000/-) five thousand dirhams if the same fails to submit tax declaration on time. However, the same shall be levied (2%) of every 30 days or any part thereof from the value of accrued tax as is in the declaration or in the final adjustment made by the Division, if the branch fails to pay the same within the legal specified term. In all cases, the administrative penalty, that entails no exemption from tax payment, shall be collected by the same methods of collecting the tax. However, penalty may be reduced or exempted if the branch submits a justification, to be accepted by Division, of non-performing its obligation. Therefore, the exemption shall be issued by virtue of a resolution from Director General. Article (23) A penalty of tripling and non-exceeding fivefold of the accrued tax shall be levied on every branch:- 1. Deliberately reduced the actual value of the branch business and its profits with an intent to non-pay the accrued tax or part thereof; and 2. Deliberately refrained to submit information; submitted incorrect information and erroneous data or destructed; or concealed records and documents with an intent of tax evasion. No punishment sentenced, in implementation for this Law, may be mitigated. Article (24) Criminal Lawsuit about the crimes provided in the abovementioned article shall be only initiated under a request from Director General. The same may be conciliated in any case whatsoever in consideration for paying the double of the accrued tax. Therefore, the conciliation shall results in lapse of the criminal lawsuit. Article (25) After enforcing this Law, the bank, conducting its activity for the first time in the Emirate, shall be exempted from the tax levied hereby for two years as of the date of licensing to operate the activity. In all cases, no tax exemption prescribed under other laws shall be applicable to such bank. Article (26) In coordination with Economic Development Department, Division shall notify branches of foreign banks operating in the Emirate of this Law. However, these branches shall be registered with the Department within (20) twenty working days from the date of this notice. Article (27) This law shall be published in the Official Gazette and be applicable from the date of its promulgation taking into account the validity of provisions hereof relating to tax as of the fiscal year 2018. Issued by us on Wednesday, Safar 12th, 1439 A.H. Corresponding, November 1st, 2017 A.D. Saud Bin Saqr Bin Mohamed Al Qasimi, Ruler of Ras Al Khaimah

  • The following words shall have the following meanings respectively unless context otherwise indicates:

    “UAE” refers to the United Arab Emirates.
    “Emirate” refers to Ras Al Khaimah.
    “Ruler” refers to His Highness Ruler of Ras Al Khaimah.
    “Government” refers to Ras Al Khaimah Government.
    “Department” refers to Finance Department in Ras Al Khaimah.
    “Director General” refers to Director General of Finance Department.
    “Division” refers to Tax Division in Finance Department;
    “Branch” refers to a bank unit operating in the Emirate and affiliating a foreign bank.

    “Tax Base” refers to the branch net profit subject to tax under the provisions of this Law.

    “Fiscal Year” refers to the year starting in January 1st and ending in December 31st of each calendar year.

    “Capital Expenditure” refers to the expenses having a capitalism nature and non-operational nature that might be useful in consecutive financial terms.
     
    “Regional Administration Expenses” refers to the supervisory expenses of the regional administration existing inside and outside the Emirate.

    “Central Expenses or Inter-Branches Common Expenses” refers to common operational expenses used to serve all branches operating in the Emirate.

    “Central Revenues or Inter-Branches Common Revenues” refers to operational revenues resulting from investments and common activities of branches operating inside or outside the Emirate.

    “Outstanding Interests” refers to the accrued interests of the slow-moving and doubtful debts, which have been set aside from revenues account.

    “Accounting Policies” refers to the policies applicable on a fixed basis by the foreign branch. The same shall be established on basis of accrual principle pursuant to the International Reporting Standards.

    “Branch Assets” refers to total assets of the branch without deducting the doubtful debts allocation, the outstanding interests of these debts and any other allocations.

    “Registration” refers to the measurement performed by the branch to be recorded in the Department for Tax purposes.

  • The provisions of this Law shall be applicable to all branches of foreign banks operating in the Emirate.
  • A (20%) twenty percent tax out of the branch tax base net shall be levied.
  • Branch shall apply for registration before the Division and notify the same of any change therein within no more than (20) twenty working days from the date of obtaining the license or amendment. Director General, under a resolution therefrom, shall determine the procedures related thereto.

  • Tax Base shall be calculated pursuant to the accounting policies followed by the foreign branch and be approved by external auditors of the branch after carrying out necessary amendments  pursuant to the following rules:
    A. For tax purposes, expenses of the head office shall be substantiated and registered to reflect the base of distributing these expenses and certified by the auditors of the head office;

    B. Branch shall incur the regional administration expenses on a pro rata of its assets to the total assets of the branches operating inside or outside the UAE which are covered by these expenses;

    C. Expenses of the head office and the regional administration collectively may not exceed 2.5% of the total revenues of the branch after excluding inter-branches received and paid interests inside the Emirate;

    D. Branch shall incur the central and common expenses on a pro rata of its assets to the assets of the branches inside and outside the UAE;

    E. The branch proportion shall be calculated out of the net central and common revenues on basis of the percentage of the branch assets to total assets of the branches included in these revenues;

    F. General and contingency allocations are not deemed due deductible expenses for tax purposes. Allocations specified for the customers’ doubtful accounts may be allowed. However, the allocation shall be deemed specified if the same belongs to a specific doubtful and totally or partially unguaranteed debt and all evidence indicates non-possibility to collect it totally or partially;

    G. Outstanding interests may be deducted if the same belongs to unguaranteed debt without any movement thereon and all evidence indicates non-possibility to collect it totally or partially;

    H. The total value of fixed assets and capital expenditure may not be fully deducted at the same year wherein purchase or disbursement occurred. However, these assets shall be depreciated and these expenses shall be amortized within reasonable term of years, as is recognized between banks;

    I. Bank transactions between the branch and the head office or the other branches inside and outside the UAE including interests and received or paid commissions shall be calculated on basis of inter-banks prevailing  interest rates of different currencies in addition to the applicable and recognized bank standards concerning currencies and other fees;

    J. Branch loss of any fiscal year may be carried over to the consecutive year provided that the same shall be discounted from its profits for the purposes of calculating tax base. However, the remaining part, if any, shall be carried over only to a second year. No loss realized in any year may be deducted from the profits of the previous years; and

    K. Branch must follow the accounting policies pursuant to the International Reporting Standards.    

  • The branch shall keep records of its accounting business, books and any documents or information related to tax and maintain the same for (5) five years consecutive to the tax accrual.
  • Tax declaration, data, information and records related to tax, to be submitted to the Division, shall be submitted in Arabic and Division may accept data and documents related to tax in any other language provided that the branch is committed to provide an Arabic translation thereof to the Division on its account and responsibility, if requested.
  • Within (90) ninety days from the date of fiscal year expiry, branch shall submit tax declaration; signed by its legal representative, approved by external auditors and attached thereto its audited financial statements, to the Division wherein tax base of the relative fiscal year shall be reflected. However, the branch must pay tax reflected in declaration within that period.
  • If branch business is liquidated, tax declaration about its business during the year wherein the same ceased up to the date of cessation shall be submitted within (90) ninety days from the date of cessation pursuant to the rules of annual report submission.
  • Division may audit tax declaration submitted by the branch and examine all books, papers and records for verification. In this regard, Division may obtain original records or a copy thereof; rectify or amend the declaration; and claim tax differences accrued from the branch after amendment or rectification. 
  • Division has the right to audit all books, records and papers of the branch in case of non-submitting the tax declaration on time specified. Moreover, Division may issue approximate tax adjustment, if auditing fails for a reason related to the branch.
  • 1. Division shall issue tax adjustment wherein accrued tax, to be notified to the branch, shall be prescribed If, after auditing, it is established that a tax exceeds statements in the declaration is accrued or the declaration is not submitted. This adjustment may not be conducted after (5) five years from the end of the fiscal year for which the tax is accrued and this adjustment data shall be determined under a resolution from the Director General; and
    2. If tax evasion is established, Division has the right to conduct tax adjustment within (15) fifteen years from the end of the fiscal year during which the evasion has been committed. The same provision shall apply in case of non-registering the branch with the Division provided that such period shall commence from the date on which the branch should have been registered.
    Branch shall pay the tax of which an adjustment has issued within (20) twenty working days from the date of its notification.

  • 1. Branch may apply to the Division to reconsider any resolution issued thereby. This application must be substantiated and be applied within (10) ten working days from the date of notifying the resolution thereto;

    2. Division shall examine the application of reconsideration that meets requirements, conclude a substantiated resolution thereon within (20) twenty working days from the date of receipt and notify the branch with its resolution within (5) five working days from the date of issuing the same; and

    3. Branch is entitled to challenge resolutions issued by the Division before the committee examining the tax objections within (10) working days from notifying the same thereto and the challenge shall be recorded in the register maintained for that purpose.

  • Under a resolution from the Director General, a committee shall be established from a head, who is a non-division staff and two tax expert members to examine tax objections arising from the application of the provisions of this Law. An employee, authorized thereby shall be appointed as a secretary of the Committee.

  • The Committee, holding confidential meetings, shall convene in headquarter of Finance Department or any other place, if necessary. Resolutions thereof, adopted by majority of members’ votes, shall be substantiated and signed by the Head and Secretary within no more than (5) five working days from the date of their issuance.
  • 1. Committee shall examine the objection submitted thereto within (30) thirty working days from the date receipt and notify the branch and the Division of its resolution within (10) ten working days from the date of its issuance. The branch shall pay the accrued tax pursuant to this resolution within (20) twenty working days; and
    2. In all case, no tax disputes lawsuits shall be admitted before the competent court unless the same is objected initially before the Committee.
  • Resolutions issued by the Committee shall be deemed a writ of execution even if they are objected. The same shall be executed by the Execution Judge before the competent court pursuant to the Civil Procedures Law applicable in the UAE.

  • Both government and branch have the right to object the Committee’s resolution before the plenary circuit of the First Instance Court within (20) twenty working days from the date of notice on resolution if the value of the tax difference accrued thereby and the penalties exceed (AED 100,000/-) one hundred thousand dirhams. This objection is excluded from the permission to file a lawsuit, which is prescribed in the Law of Government Lawsuits No. 4 of 2012.

  • If the branch failed to pay the accrued tax or administrative penalties within the term prescribed in this Law, the following procedures shall be taken against:
    1. Division shall serve the branch a notice to pay the accrued tax and administrative penalties within (20) twenty days from serving the notice thereto;
    2. After serving the notice, if the branch fails to pay, Director General shall issue a resolution, served to the branch and attached thereto tax and penalties adjustments,  to oblige the same to pay the accrued tax; and
    3. Resolution of Director General issued pursuant to the provision of the abovementioned clause is deemed a writ of execution to be executed by the Execution Judge in the competent court.

    In all cases, the accrued tax and administrative penalties notified to the branch are not time-barred.

  • Branch is entitled to refund all amounts paid in excess of the accrued tax under an application submitted to the Division subject to the following:

    1. Division shall refund the excess paid amounts pursuant to the controls and procedures developed thereby;

    2. Division shall offset the amount to be refunded and any other tax amounts or administrative penalties accrued on the branch; and

    3. Division is entitled to non-refund the amount if other disputable tax amounts were established.

  • Tax Auditors in the Division shall have the capacity of judiciary officers while establishing violations committed in contradiction to the provisions of this Law.
  • Branch shall be levied an administrative penalty of (AED 5000/-) five thousand dirhams if the same fails to submit tax declaration on time. However, the same shall be levied (2%) of every 30 days or any part thereof from the value of accrued tax as is in the declaration or in the final adjustment made by the Division, if the branch fails to pay the same within the legal specified term.
    In all cases, the administrative penalty, that entails no exemption from tax payment, shall be collected by the same methods of collecting the tax.
     
    However, penalty may be reduced or exempted if the branch submits a justification, to be accepted by Division, of non-performing its obligation. Therefore, the exemption shall be issued by virtue of a resolution from Director General.

  • A penalty of tripling and non-exceeding fivefold of the accrued tax shall be levied on every branch:-

    1. Deliberately reduced the actual value of the branch business and its profits with an intent to non-pay the accrued tax or part thereof; and

    2. Deliberately refrained to submit information; submitted incorrect information and erroneous data or destructed; or concealed records and documents with an intent of tax evasion. 

    No punishment sentenced, in implementation for this Law, may be mitigated.

  • Criminal Lawsuit about the crimes provided in the abovementioned article shall be only initiated under a request from Director General. The same may be conciliated in any case whatsoever in consideration for paying the double of the accrued tax. Therefore, the conciliation shall results in lapse of the criminal lawsuit.
  • After enforcing this Law, the bank, conducting its activity for the first time in the Emirate, shall be exempted from the tax levied hereby for two years as of the date of licensing to operate the activity. In all cases, no tax exemption prescribed under other laws shall be applicable to such bank. 
  • In coordination with Economic Development Department, Division shall notify branches of foreign banks operating in the Emirate of this Law. However, these branches shall be registered with the Department within (20) twenty working days from the date of this notice.
  • This law shall be published in the Official Gazette and be applicable from the date of its promulgation taking into account the validity of provisions hereof relating to tax as of the fiscal year 2018.
Classification
  • Civil Legislation
  • Economic Legislation
  • Investment Legislation
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