This is not a complete guide to setting up in Dubai but one that gives an overview of many of the financial, and some of the legal, issues of which new residents need to be aware.
Your ability to live in the UAE is linked to employment and it is impossible to rent a property (apart from on a short-term basis) without a residency visa and accompanying identity card. These will be provided by your employer or as part of the package when you set up a trade licence if you wish to have your own business. You also need these to buy a car, get a UAE driving licence, get medical insurance or get an alcohol licence – a legal requirement for residents if you want to buy alcohol anywhere and or keep alcohol in your home. Co-habiting is illegal.
The rules can vary between emirates, although the main legal issues are correct for all, but this guide is mainly for Dubai residents.
Banks are regulated by the UAE Central Bank and most offer a modern banking service, with decent on-line banking. Everyone can tell you a story of poor service from one bank or another but in my experience, dealing with numerous banking issues over the years, there is not a huge difference between most of them.
People often ask which is the best bank to open an account with but there is no easy answer to that question. Often the bank used by your employer is a good option, particularly if you may want to take a loan to buy a car at some point, for example.
Whilst it may appear that banks want to hand out credit cards or personal loans like sweets please don’t fall into the debt trap that so many do. Interest rates on credit cards are particularly high so whilst they can be useful it is best to repay them in full each month. It is important to be aware that non-payment of debts, or bouncing a cheque, is a criminal offence with serious consequences.
UAE bank accounts are frozen on death. It is best that husbands and wives have separate accounts, preferably with different banks so that in the event of one of them dying the other still has access to money. It is not necessary to have a regular salary to open a simple account.
Bank account are also usually frozen temporarily if the bank is advised that you are changing employment. If there are no loans or debt it will be unfrozen quickly but if you have liabilities it may remain frozen until you prove you have a new job and income to service the debts.
Due to the issue with accounts being frozen it is beneficial to have an offshore account and you don’t need large sums to open one. The benefits of offshore banking for expats
Retail banks offer poor rates of exchange on currency transfers so you can get much better value for money by using a specialist company: How to save money on your currency transfers
It can be useful to keep a bank account active in your home country as it can be tricky to open one on your return without several months proof of address.
The law of the land
The UAE follows Sharia law and that applies to everyone who lives here, expats and locals, Muslims and non-Muslims alike.
This means that wills you have written in your home country will, not be valid or recognised here. If you build up assets in the UAE, buy property, or have dependent children you may want to take steps to protect them. See link for your options: Wills and how to protect family and assets
Whilst the UAE is advertised to new residents as being tax-free suggest that to any long-term resident and they will laugh! There is no personal income tax but we pay taxes and fees on a long list of items. VAT is being introduced on most goods and services from 1st Jan 2018 at a rate of 5%.
Be aware that no longer living in your home country doesn’t always mean you are exempt from income tax there. The rules vary between countries but the onus is on the individual to be aware of the relevant rules.
I advise many British Expats on these issues and Brits need to be out of the UK for at least one full tax year (6th April to 5th April) to be considered UK non-resident for tax purposes in respect of their non-UK earnings.
UAE Labour Law was introduced in 1980, there have been various updates since then, and this applies to the vast majority of companies. Government organisation are exempt although most largely adhere to the rules.
Sadly, far too many companies try to flout the law but there are procedures in place to assist employees. I write about these issues for The National newspaper each week and a link to my column with numerous reader Q&As is here: On Your Side column in The National newspaper (Note that we are in the middle of a re-launch of the newspaper and archives are being transitioned. If you see a 404 page, try again in a day or so. Thanks.)
This is a broad subject so I just want to touch on a few major points.
There are both limited (fixed) and unlimited contracts and different rules apply, especially on leaving employment. Limited contracts have significant penalties if you want to leave before the end of the fixed term. Limited contracts are common in education and the medical profession.
Employees leaving a company in the first six or 12 months can receive an employment ban although this is far less restrictive than in the past.
The End of Service Gratuity is not an adequate replacement for proper retirement provision and it is reduced if you resign in the first five years of service.
Unless you are single and have funds to support yourself for some time, it is unwise to move to Dubai without a job. This is a costly city and there are no guarantees of employment once you are here. Far better to obtain a job before moving and also to have negotiated a decent salary package as pay increases are not common.
Note that your employer is obliged to pay for your residency visa, and any other costs associated with employing you and is not permitted to pass them on. They are not obliged to cover the costs of you sponsoring your spouse or dependents so you may need to pay for their visas and identity cards.
Many people work for themselves but you cannot simply set up and run a business. You need a trade licence and you are looking at paying at least AED 20,000 a year for this. There are different types of companies and licences depending on the type of business you wish to run. There are a number of specialist companies who can assist with setting up a company.
Dubai has a wide range of schools, with different curricula. School fees are not cheap however, and increase above the rate of inflation, and salary increases, each year. Ideally you negotiate a salary package that cover school fees, or if that is not possible, you fully explore the options and ensure that your income is sufficient to cover the fees and all the add-ons.
For a Western style school, fees vary significantly but average AED 40,000 to AED 60,000 a year for primary schooling and AED 60,000 to AED 90,000 for secondary education. Sixth form fees are higher still.
For anyone employed on a Dubai residency visa, their employer is legally obliged to provide medical insurance in line with DHA (Dubai Health Authority) rules. Employers are not obliged to provide cover for dependents so if they don’t offer this the responsibility lies with their sponsor, usually the spouse or parent.
All policies cover pre-existing medical conditions and include maternity cover. Basic, and cheap, cover is available for lower paid employees and domestic staff.
This is a complex field with many insurance companies in the market and each with several plans. There is no additional cost in using a broker who really understands the market and can source the best plans for you, as well as assist with any issues. Please contact me if you would like professional advice on this matter.
There is also mandatory medical insurance for anyone on an Abu Dhabi visa but not for the other five emirates. With the cost of treatment it would be foolish not to arrange decent medical insurance.
Is your existing cover still valid if you move to the UAE? Not all plans are, and even if simple life polices remain valid, often plans with additional benefits such a critical illness cover may not be.
General information on life cover to protect your family here: Life cover & other protection options
Mortgages and property
If you own a house with a mortgage and plan to rent it out in your absence you will require the permission of your lender and may require additional insurance.
Most expats rent an apartment or villa in the UAE but be aware that rent is usually payable quarterly or half-yearly. Facts on rental law here: Rental laws in Dubai
We all pay a Municipality charge of 5% of rent payable (or equivalent if owned) and this is added to the monthly DEWA (Dubai Electricity & Water Authority) bill.
If you decide to buy somewhere you can find out more about the process here: Buying property & getting a mortgage in Dubai
Useful financial tips
- Watch where you shop. Prices can vary significantly between supermarket chains. Consider buying non-familiar brands as ones from a home country can be pricey.
- There are lots of discount and voucher schemes and these are commonly used. The Entertainer, which is full of 2-for-1 offers, is particularly popular.
- As this is a fairly transient city there are always people leaving and selling furniture and white goods. Bargains can be had if you need to kit out your new accommodation.
- Check out store and hotel group loyalty cards as these can be worthwhile.
- Do not take on any major commitments at outset. Instead, rent a car, rent a cheaper apartment until you are sure that you will be staying and are sure of your budget.
- Avoid cold-callers trying to sell you financial products, especially 20-25 year savings plans.
- Keep a budget of your expenditure so you get a real idea of where your income is going.
There are many more topics that could be covered but I want to restrict this article to the main financial issues when moving to Dubai.
So welcome to Dubai, to the UAE, and an exciting new life!
If you have any queries about any aspect of personal financial planning, including mortgages, life cover, offshore banking, currency transfers, savings, pensions, investments, wills and more, please contact me at email@example.com