The IBSA Podcasts

A Dive into Dubai's Tax-Free Living and Residency Options

• Lucie • Season 3 • Episode 10

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Curious about how Dubai could be the perfect escape from the UK’s new tax changes? Tune in to our latest IBSA podcast episode as Roy Saunders sits down with tax expert Jimmy Sexton from Esquire Group in Dubai. Discover why Dubai is a haven for the wealthy with no personal income tax, low or no corporate income tax, and easy pathways to residency through employment or investment. Jimmy shares his personal journey of living in Dubai for the past eight years, shedding light on the city's exceptional healthcare, top-tier education, and vibrant lifestyle.

Listen to Roy and Jimmy break down the various visa options, including the sought-after golden visa for a relatively inexpensive real estate investment. Learn what it takes to become a tax resident in the UAE and how this dynamic city offers a blend of luxury and convenience that is hard to match. Whether you're pondering the tax implications or curious about the day-to-day living standards, this episode is your comprehensive guide to understanding why Dubai could very well be your next home.

This series of podcasts explores the beneficial tax regimes in Italy, Spain, Portugal, Malta, Cyprus, Switzerland, Singapore, Israel and Dubai in respect of where UK residents may wish to emigrate in light of the non-dom changes introduced by the Conservatives, and the likely tightening of these rules under the new Labour government. 

Speaker 1:

Hello and welcome to this IBSA series of podcasts on considering countries to where UK residents may wish to emigrate, in light of the non-dom changes proposed by the Conservatives and the likely implementation of these rules under the new Labour government, including bringing foreign trust assets within inheritance tax and increasing capital gains tax rates to income tax levels particularly aiming at fund managers. My name is Roy Saunders, founder and chairman of the IBSA, the International Business Structuring Association, which is a multidisciplinary global association of entrepreneurs and their professional advisors, dedicated to sharing their expertise with each other within a great networking platform. Our current series of 15-minute podcasts will review beneficial tax regimes in Italy, spain, portugal, malta, cyprus, switzerland, singapore, israel and Dubai. Today I'm joined by tax specialist Jimmy Sexton, a long-term and valued member of the IBSA, who is a founder of Esquire Group in Dubai. Jimmy, can we start by you discussing what is it about Dubai that may appeal to UK wealthy individuals who want to get out of the UK tax network?

Speaker 2:

Absolutely. I mean, I think the UAE has a lot to offer. You know, I think, as you know, I've been in the UAE for eight years now and I think, especially over the last, you know, three, four years since COVID, many more people have moved there for the advantages that the UAE offers. I mean, obviously one of the big advantages is the tax advantage. Up until recently there was absolutely no type of income tax. Now they've implemented a corporate income tax, but there's still no personal income tax, right? So if you're a wealthy individual I mean much like the UK if you had foreign income, that's not going to be taxed in the UAE as long as it's foreign investment income. If you're self-employed in the UAE, the corporate income tax would apply now, but other than that, there's absolutely no personal income tax on local or foreign income.

Speaker 1:

What is the corporate income tax rate?

Speaker 2:

So the corporate income tax rate is fairly low compared to most other jurisdictions it's only 90% and generally it would only apply to corporations, but it also does apply to self-employed individuals.

Speaker 2:

That's interesting because the worldwide corporate income tax rate that people are now advocating under the OECD is 15%. So Dubai comes below that level that the UAE is a very safe place to live. You have great health care, you have great schooling. It's geographically very centrally located. You have a great airline that you can fly anywhere in the world to. It's great restaurants, great entertainment, you have the beach and it's an all-in-all very pleasant place to live.

Speaker 1:

No, no, it sounds very good. I think we'll all be tempted by that. What do you have to do to become tax resilient, and how difficult is it?

Speaker 2:

Well, there's a difference, and this is something that I think a lot of people misunderstand is that there's a difference between being a legal resident and being a tax resident.

Speaker 2:

So becoming a resident is fairly simple, and the UAE has continually released different types of visas and made residency easier to get, so there's typically two different types of visas. One visa is linked to your employment right, so you get a job in the UAE, you get a residency permit. The other is as an investor, and so this would require, for example, starting a company in the UAE. If you start a company in the UAE, then you generally qualify for an investor visa. Or if you invest in UAE real estate, then you also qualify for a residency visa. If you invest 2 million dirhams or more, then you actually qualify for what's known as the golden visa, which is essentially a 10-year visa. Normally, the visa is depending on the length or the type of employment that you have or the type of investment you made are generally either two to three years, and if you get your visa through a real estate investment, if you're under that two million threshold, then you would also get, I believe, a three-year visa.

Speaker 1:

What's? Two million, yeah, million, yeah in dollars.

Speaker 2:

In dollars it's a little over a half a million, so you're probably about six hundred thousand dollars or something like that.

Speaker 1:

So it's not a fortune.

Speaker 2:

No, and then you get a ten-year visa, which is which is really convenient. I mean, even if you get the three-year visa, you know, all that means is every three years you have to renew it, right? So you have to go for medical tests, you have to pay some fees, which isn't a lot of work, I mean, it's a very quick and painless process, but obviously not having to do that for 10 years is also quite advantageous. It's just one less thing that you have to worry about.

Speaker 1:

I remember when people have created their own companies in Dubai. I don't know whether it still applies, but there had to be local ownership. Can we now have 100% ownership in an individual sense?

Speaker 2:

Well, I think there's two different things that we need to look at. Right. There's mainland companies and there's free zone companies. So free zone companies you've never needed a local partner. Those have always allowed 100% foreign ownership, and most people that have gone to set up companies in the UAE to get visas have generally set up companies in free zones, have been 100% owners and got their visas that way Up until a few years ago. In order to start a mainland company, then you needed to have a local partner who owned 51% or more. That rule has been abolished over the last couple of years and now it's absolutely possible for a foreign owner to own 100% of a mainland company.

Speaker 1:

And how would you compare Dubai, for example, to Abu Dhabi?

Speaker 2:

I think the biggest differences are that Dubai is. If you maybe compare Dubai to, for example, to Abu Dhabi, I think the biggest differences are that, you know, dubai is if you maybe compare Dubai to New York and Abu Dhabi to Miami right, I mean, dubai is very metropolitan, it's very busy, there's a lot of traffic, there's a lot of business, there's, you know, tons of restaurant venues and everything else, which Abu Dhabi also has. But Abu Dhabi is much more spread out. I mean, when you look at the buildings, it's not quite as dense. You have a lot more boardwalks along the beach. Everything's a little bit more calm, less traffic, more nature. You know they have a lot more greenery, a lot of mangroves and stuff like that, where you can go kayaking and hiking and stuff like that. I mean, dubai has these things as well, but Abu Dhabi is just a little bit more spread out, a little bit calmer.

Speaker 1:

Okay, now both countries. Of course they're part of the UAE. You've got a very wide and burgeoning tax treaty network for the UAE with countries such as France and UK and elsewhere. Are there any restrictions in individuals or companies, particularly free zone companies, benefiting from the double tax treaty network?

Speaker 2:

So that's a very good point, roy.

Speaker 2:

I mean, that's one of the things that I think a lot of people miss is that the UAE actually has a larger tax treaty network than Switzerland, so they have a very, very broad tax treaty network.

Speaker 2:

Now this goes back to the question before about tax residency.

Speaker 2:

Right, so you have legal residency, which is your residency permit, which gives you the legal right to reside there, but that doesn't necessarily make you a tax resident there.

Speaker 2:

So the rule as it is now, in order to be a tax resident in the UAE, you have to spend at least 90 days in the UAE and I believe it's 180, and not more than 180 days in any other country and then you can apply for and receive a tax residency certificate.

Speaker 2:

That is generally what you would need to access tax treaties as an individual and, like many tax treaties around the world, some of the tax treaties in the UAE can contain limitations on benefits provisions for companies, so that, even if you have so free zone companies and local companies have a right to access the tax treaty network, but often there is a requirement that a certain percentage of that company be owned by a UAE resident or a UAE national, and so, without the tax residency certificate, you often wouldn't qualify as a resident for tax purposes in order to meet the shareholding qualification required for the company to access the treaty. Now, one of the interesting things is that a lot of people don't realize is that a lot of times, a foundation will qualify as a UAE resident or national regardless of the people, let's say, the stakeholders in the foundation, regardless of their tax residency status.

Speaker 1:

That's interesting, and is that the same for trusts as well?

Speaker 2:

I don't believe. As far as I understand it, a trust would not qualify because a trust isn't registered anywhere, right? I mean, the trust is a contract, doesn't have the same legal status as a foundation. But I had a case recently actually, with somebody who wanted to access the treaty with Canada and in that particular tax treaty what was interesting is for a company to qualify I forget what the shareholding percentage was, but essentially the shareholders needed to be UAE nationals and we had this reviewed by a Canadian tax council and they agreed that a foundation would qualify as a UAE national for purposes of the treaty, which was quite an interesting result because the person who was behind the foundation is a UAE tax resident but not a national, which obviously is a higher standard because that would require being a citizen. But the foundation qualified as a national, which I thought was something very unique and obviously opened some doors to treaties that wouldn't be available to residents, for example.

Speaker 1:

Okay. So I mean we've got a lot of changes coming up in the UK with the new Labour government, particularly maybe on immigration. I don't know. Do you think that there'll be any changes in Dubai, because you've mentioned about the corporate income tax being introduced. What about immigration or any other aspect, social aspect?

Speaker 2:

Well, I mean, the UAE is on a growth path, right, so they're trying to attract more residents at this point and that's something that they would like to achieve, and so, if anything, I see immigration getting easier, right. I mean, they've even developed types of residency permits that you can get as an individual, for influencers, for example, and I know there's a few other types of visas that you can get without having to invest in real estate and without having to start a company. It's something that you can get as an individual. They're continuing to make more visas available to people and also, even on the real estate side, they've lowered that threshold that's now at 2 million dirhams to receive the golden visa. That's come down, I think, two or three times, if I remember correctly. I think it started off at 10 million dirham investment and then it came down to 5 million and now it's down at 2 million. So they're definitely trying to make it easier for people to be able to obtain residency visas to attract people.

Speaker 2:

And the one thing that I would mention about the corporate income tax like I said, on the individual side, the only income that would be subject to that 9% corporate income tax is self-employment income. But even when you look at the corporate side, there are still several attractive aspects of that corporate income tax law. For example, if you have a free zone company that receives dividends from stocks and other securities, it's not subject to 9% corporate income tax right. So if you have a holding company or a personal investment company whose sole income is from, let's say, dividends and capital gains selling stocks, that's going to avoid the 9% corporate income tax.

Speaker 1:

And what about employees?

Speaker 2:

No, employees are not subject to any type of income tax.

Speaker 1:

Okay, so it's fascinating. I think we've covered a lot of ground there, so thanks very much, Jimmy. I'm sure that's going to be very interesting for everybody. Thank you for joining me today and thanks everybody for listening.

Speaker 2:

Thank you for having me, Roy.