Where do you begin when describing Dubai? After all, this is a city with an aquarium and underwater zoo, a colossal Diplodocus skeleton and over 1400 retail stores and eateries – all under one roof in the world’s largest shopping mall.
It’s a place where you can go unnoticed driving a Lamborghini, as long as you’re not shirtless, a serious temptation during the unbearably hot desert summers.
The sheer scale, lack of consumer restraint and the seemingly endless ‘bling’ of the place make it a bit like Las Vegas, but without the casinos and bad behaviour.
One of the seven emirates that make up the United Arab Emirates (UAE), Dubai and its six partner states were once as overtly conservative and authoritarian as the rest of the Middle East.
However, an increasingly liberal outlook, matched to an ambitious financial vision, attracted many Westerners to Dubai and Abu Dhabi, progressively opening the country up to Western culture.
If Abu Dhabi is viewed as the ‘elder statesman’ of the two cities, then Dubai is very much the jewel in the crown of the country. It’s a somewhat unique city because though it’s not typically Middle Eastern, neither is it on a par with the long-established capital cities it aspires to.
Living in Dubai
The city has its critics, with some accusing it of being superficial and lacking a soul. Unlike Western cities with a rich history, culture and well-defined identity forged over hundreds of years, Dubai is a brash modern city.
There is much history there, but it isn’t easy to see behind the skyscrapers and shopping malls. The fact that it has really only been relevant for a few decades is partly to blame for that sense of artificiality.
During the summer months, from June to September, the desert heat is fierce and you’ll need air conditioning to withstand it. Shopping malls, restaurants, and extravagant entertainment are all easily accessible.
Currently, being gay is still a crime there and public displays of affection can have consequences. Women are encouraged to dress modestly in public areas, but the city has relaxed its overly conservative approach, depending on where you live. In areas with a sizeable traditional population, hijabs and abayas are the order of the day for women. Meanwhile, in areas like the Marina, which are heavily westernised, foreign women can jog in lycra or wear the latest fashions without fear of interference from the authorities.
Alcohol consumption is acceptable for foreigners in licensed bars, restaurants and hotels. However, drinking to excess and any kind of public disorder is heavily frowned upon. That said, in a bid to attract foreigners, Dubai recently suspended a 30% tax on alcohol and eased licensing requirements, so it’s now easier and cheaper than ever to enjoy alcohol ‘responsibly’.
In cost-of-living terms, Dubai inspires a vision of extravagance, super-cars, luxury homes and world-class shopping and dining. But if you’re looking for a more typical lifestyle, finding affordable apartments in the same price bracket as most major cities is possible. If you’re looking to enter the real estate market, buying into a new development from a construction company is usually cheaper than purchasing resale property from an investor or individual.
If you’re renting, you should note that the year’s total rent is typically collected in advance, which most people comply with through a pre-agreed number of post-dated cheques. Be aware that the authorities here take the issue of ‘bounced’ cheques very seriously so rental agreements should not be entered into lightly.
The UAE does not provide any form of public medical insurance for expats, so good-quality private health insurance is a requirement if you’re relocating there. Local healthcare is of exceptional quality, with physicians and experts from all over the world drawn to the city like most other professions.
If you’ve got kids of school age, they must attend private international schools, which can be expensive.
Becoming a Resident of Dubai
If you want to apply for residency in Dubai, you have a few options with its Golden Visa program. The UAE’s Golden Visa is a long-term residence visa that allows qualifying foreigners to live, work or study there and enjoy multiple benefits. It’s valid for five or ten years and can include family members, spouses and children regardless of age. It also allows you to sponsor domestic helpers.
The requirements depend on the category of visa you apply for. There are several types, but ‘investor’, ‘talent’ and ‘entrepreneur’ are the main ones. To keep the visa valid, you must visit the country at least once every 180 days. Although this requirement keeps changing, we recommend you adhered to it.
You must show you’ve invested at least AED2 million in a public fund or demonstrate your business has capital of the same amount. You’re also required to pay the government no less than AED250,000 annually. Investment capital cannot be from a loan and you must have medical insurance for yourself and your family if applicable. It’s valid for ten years.
If you own one or more properties with a value of not less than AED2 million, you can qualify for a Golden Visa for a period of five years. If you need a loan to buy property, it must be from an approved local bank.
You can qualify for a five-year Golden Visa if you own an economic project with a value not less than AED500,000 of a ‘technical or future nature based on risk and innovation’. In addition, you must have an approval letter from the authorities stating the nature of the project and establish it in an accredited business incubator.
Golden Visa categories also cover outstanding specialised talents, inventors, creatives and athletes. They generally require letters of approval and recommendation from the relevant body in the UAE.
A final option to get residence is by starting a free zone company in the UAE. You can explore our Ultimate Guide to Setting Up a Company in the UAE to understand how the process works. The cost depends on what type of company you’re opening and in which free zone, but expect to pay one-off fees of between AED20,000–AED30,000 (around USD$5,445–US$8,1698).
The cost increases in direct proportion to the extra privileges you require. A foreign trade name or additional approval from a governing entity can raise the price.
Citizenship is basically a no-go. In rare circumstances, an exception may be made for outstanding service to the nation, but it’s not really a place you go for citizenship. Dubai is somewhere you go for company formation or for tax residence where you can reduce your taxes.
Tax Changes in Dubai
The UAE is developing into a global financial hub that wants access to and acceptance from the West. Therefore, it has implemented some tax reforms to avoid being considered a tax haven and subsequent blacklisting by international partners.
In short, the UAE is not the apparent tax haven it once was.
A VAT rate of 5% was introduced in 2018 and, as of 2023, the UAE introduced a 9% tax on some corporations. No tax has thus far been imposed on individuals, meaning that if you derive income from dividends, interest, foreign rental real estate, royalties, or similar sources, you can still enjoy a tax-free lifestyle in Dubai.
That said, if you run or manage foreign corporations from Dubai, you now face triggering permanent establishment rules that could make a foreign entity taxable in the UAE. The ruling states that corporate tax will apply to foreign entities and individuals only if they conduct a trade or business in the UAE in an ongoing or regular manner.
Lowering your taxes there is still possible, but you must be more careful than before. For example, personal tax is still zero but corporate tax is applied unless you fall under the qualifying income bracket.
Despite the tax changes, a free-zone company can maintain a 0% tax rate by meeting certain conditions. However, there are different sets of corporate tax regulations for UAE free zones. You must meet the criteria to become a qualifying free-zone person. Any qualifying income then derived is subject to 0% corporate tax as determined by the qualifying business activity or transaction conducted within the free zone.
Relatively complex criteria are used to determine qualifying income. Navigating the rules can be confusing as they are often unclear and subject to change. Ideally, no one should go through this type of process without help.
At Nomad Capitalist, our team of professionals works worldwide to provide you with unparalleled expertise. Find out more here.
Withholding Tax on US-Sourced Income
Whether you’re a US citizen or not, a withholding tax is applied in the UAE if you have US-sourced income in the form of royalties and dividends. For example, if your main business is selling books on Amazon in the US, the income falls under the category of royalties and is therefore subject to tax in the US. You cannot avoid this and can only reduce it under a country-specific tax treaty.
So, in Cyprus, Malta, or Thailand, for example, countries with a tax treaty with the US, withholding tax is reduced to 15% or less based on the terms of the tax treaty.
However, the UAE does not have a tax treaty with the US. Depending on the type of income you receive, the UAE may not be your best option if it’s US-sourced. This also applies to people not from the US but who trade on the US market.
Optimising Your Taxes
With the imposition of corporate tax, Dubai is not strictly tax-free anymore, though you can still live there and structure your affairs to pay little or no tax. For example, if you are a resident and have an offshore company located outside the territory in a tax-free country, the UAE will not tax you personally and you can still pay zero tax.
So, in Dubai, you can optimise your taxes, but if you live there and have an ‘operating’ company, it will likely be taxed at 9%. This is still low compared to other countries, but it’s not tax-free.
There is zero tax on personal income, but corporate tax is zero only in certain situations. If you’re a US citizen moving to the UAE, you cannot reduce your taxes via a tax treaty because there isn’t one.
With the imposition of VAT, corporate tax and withholding tax for US citizens on royalties and intellectual property Dubai is falling in line, under duress from the OECD, with the push for global tax harmony.
There are plenty of other places where you can legally reduce your taxes while living your desired lifestyle. It’s what we call ‘going where you are treated best’.
For many, the allure of tax-free living in Dubai may not be what it once was. Whatever you decide is right for you. We have lots of experience and expertise in helping people navigate the challenges.
We have helped 1,500+ high-net-worth clients, and we can help you. Find out how here.
