You wouldn’t believe the number of times I’ve had clients or people I know come to me saying that they’re thinking of moving to Dubai or setting up a company there to benefit from lower taxes.
There really is no simple answer to this question- whether it is a good idea to move to Dubai for tax purposes ultimately comes down to your specific circumstances. For some people it is going to be more realistic than it is for others, but I think that the most concise, and useful way to answer this question is to think about three things:
1) Will it actually be possible from a personal perspective?
2) Are you eligible from a business point of view?
3) Is it going to be beneficial financially?
To address the first point- I think that people often underestimate how big of a deal it is to relocate to Dubai. If you have a family and young children, they’d also need to move over as well which isn’t going to be a minor operation. The UAE is culturally quite a shift from the UK, so there will naturally be a change in your lifestyle which needs to be thought about.
To ensure that you’re not still classed as a resident in the UK whilst also paying tax in Dubai, the number of days that you’re allowed to be based here will be quite limited, (the exact amount will be dependent on the number of ties you’re classed as having by HMRC). This is likely to severely impact the relationship that you’ll be able to maintain with UK based family and friends. For many people, making a move like this is going to be one of the most significant decisions that they make in their lives, so a lot of thought needs to go into all aspects of it- not just the financial side.
Secondly from an eligibility point of view, your business needs to actually be operational from Dubai in order to benefit from the tax situation. If you have a consultancy practice or something similar it’s quite a simple shift, but, for other businesses, it’s not so simple. It’s important that you play by the rules here- it’s never worth the consequences of trying to trick HMRC into believing that your business is based abroad when in reality it isn’t.
Lastly, you need to bear in mind that whilst Dubai has a much looser stance on tax, it’s not a cheap place to live. There are going to be a whole range of costs that you need to think about such as purchasing property, education for children, flights back to the UK for family visits, and general costs of living. Whilst the lure of low taxes might seem good on paper, it’s important to see the bigger picture and not be blinded by this on its own.
If you’ve got any further questions about moving to Dubai, or if this article has made you want some expert advice about your tax situation, don’t hesitate to get in touch with our Tax team for an initial conversation. Reach out with us here.
