The Essential Guide to Living In Dubai and Doing Business in the UAE
How to's of Dubai business and day-to-day living in Dubai
Our detailed guide covers practical aspects of living and doing business in Dubai including residency, taxes, property, establishing a business and much more.
Being one of the top no-tax destinations in the world, Dubai is extremely popular with both international expats wanting to earn a tax-free salary and wealthy individuals and entrepreneurs who use Dubai for business purposes, tax planning and asset protection.
The lure of no-tax living that Dubai offers is really powerful, and quite a considerable number of global-minded individuals and companies flock to Dubai every year, keen to exploit Dubai’s generous offers.
It’s All About Lifestyle
Dubai is renowned as a destination for the wealthy. When it comes to the cost of living there, the numbers fully reflect the perception – in 2016 Mercer survey ranked Dubai as the 21st most expensive in the world. It is also the second most expensive city in the Middle East, after Tel Aviv.
The City of Dubai is where the majority of international expat investors base themselves in the emirate, and where professional expats find work. The City is also the lifestyle hub for the entire region.
The lifestyle in Dubai is the one thing you won’t hear expats complaining about. It is still very much a place where everyone wants to be, where the local economy is quite affluent and the way of life for some can be lavish and amazing.
There’s plenty of entertainment for everyone and some incredible shopping venues, although due to the high summer temperatures most activities take place indoors.
With a range of theme parks and private beach clubs, incredibly opulent shopping malls and cinema complexes all with an abundance of restaurants - you won’t feel lack of entertainment. You can try indoor snowboarding and enjoy remarkable music festivals featuring stars from around the world – Dubai really does have it all.
It’s worth keeping in mind that although Dubai is one of the most progressive countries in the Middle East, in comparison with most Europeans or Americans the Emiratis are very conservative people. They take their culture and heritage seriously and they expect visitors and expatriates to respect their values. If you follow the local rules and traditions, Emiratis will respect you, and you will find them warm and welcoming.
Most of the locals speak English, and the majority of European expats feel no need to learn Arabic.
The United Arab Emirates currency, dirham, is commonly abbreviated as AED, DH or Dhs. There are 100 fils in a dirham.
Dirham is pegged to the dollar. The exchange rate is fixed at 3,6725 AED to1$.
Most other world currencies are not pegged to the dollar, so their exchange rate with the dirham fluctuates daily.
Visas and Residency
When it comes to visas and residency, there is some inconvenience for foreign investors wishing to own a property in Dubai.
Although as a UK citizen you can come and stay in the UAE for 30 days with visa being granted free of charge right in the airport upon arrival, there is no long-term solution for those who purchase a property in the country.
If you buy a freehold property costing minimum 1M AED (which is around £204,000 at the time of writing), and you can prove a minimum monthly income of 10,000 AED (£2,040), you have two options: apply for a six-month visit visa that can be renewed at the airport or apply for the Property Investor Visa.
The Six-Month Visit Visa
The six-month visit visa does exactly what it says – allows an individual to enter and stay in the country for up to 6 months. It is simpler and cheaper to obtain.
However, it must be renewed every six months which makes it a pretty costly solution considering that it doesn’t offer much. Also, to renew it you have to leave and re-enter the country.
The upside of this kind of visa is that it is effective for all emirates, unlike the Property Residency Visa that only applies to property investors in Dubai.
The Property Investor Visa
Another option is the Property Investor Visa, which can be obtained by those who purchase property in Dubai. It is issued by the Dubai Land Department and must be renewed every 2 years.
The perk of the Property Investor Visa is that it gives you rights to UAE residency. With it you can apply for an Emirates ID, UAE driving license and sponsor your family as well.
There is no maximum term of stay in the country. However, the named individual on the Property Investor Visa must not spend more than six consecutive months outside of Dubai.
The Property Investor Visa is a much broader option with greater advantages than a six-month visa . Importantly, it doesn’t require the investor to exit before this period. However, it is considerably more expensive, has a stricter application process and more paperwork. It can also take over a month to obtain.
Both of those solutions are strictly for those who don’t take up any employment in the UAE and have invested in property.
Employed professional expats living and working in Dubai (or any other parts of the Emirates) have their visa and residency rights directly tied to their employment contract.
There have been some significant and positive changes in visas for investors recently: The UAE Easing Visa Rules
As Dubai is such a popular place with expats, one thing that strikes you there is how expensive rental properties are. On the one hand, it makes property investment in Dubai quite a lucrative business, as the yields are relatively high. On the other hand, only about 30% of the whole expat population of Dubai do own their property there.
Some keep renting because they are not sure how long they will be staying in the country, others – because the required 25% deposit you’ll have to put down when buying a home seems too expensive.
However, for cash buyers or those who manage to get a mortgage, owning property in Dubai can be a good addition to their investment portfolio.
Property Market Overview
As with many other countries in the world, Dubai was hit quite hard during the global economic downturn, when the property prices in the emirate fell between 50% and 70%. Consequently, those who had invested in the property market prior to the crash in 2007, were hit hardest.
However, there are some indications that the property market in Dubai is balancing itself out, thanks to cheaper mortgage interest rates which are under 5% now, and also less expensive mortgage arrangements fees.
The government and those who have already invested in Dubai have big hopes for the World Expo 2020 which will take place in Dubai. There are some mega infrastructure projects linked to the event which will hopefully lift market sentiment, boost Dubai economic development and increase the region’s attraction for expat investors.
Yet, even in a more depressed current property market, for those investors who pursue rental yields, Dubai still has what it takes.
Although yields in Dubai have fallen from 9% to 7% in the apartment market, residential rental yields in some areas are still higher than other global investment destinations such as Manhattan, London and Singapore.
Buying Property as an Investment
If you are considering buying a property in Dubai as an investment opportunity, it’s worth doing a comprehensive research in terms of what kind of property and in which location is most likely to deliver the highest rental yield.
Some affordable freehold communities such as International City and Discovery Gardens offer quite attractive yields.
Mid-tier housing in such areas as International Media Production Zone, Barsha Heights, Jumeirah Village Circle and Dubailand can also bring good yields close to 8% and above, according to statistics from property consultancy Cavendish Maxwell.
Location is as vital in Dubai as anywhere else. Picking the right neighbourhood will seriously increase the rental value of the property.
The most popular freehold Investment Areas for Non-GCC nationals are: The Palm Jumeirah, Emirates Hills, The Meadows, The Lakes, The Springs, Dubai Marina, Jumeirah Lake Towers, Downtown & Old Town Burj Khalifa, Discovery Gardens, Dubai Investments Park, Jumeirah Beach Residence, The Greens, Arabian Ranches, Falcon City, The Villa, Al Barari, Dubai Sports City, Motor City, Green Community, Business Bay, International City, IMPZ, Jumeirah Village and Jumeirah Islands.
Parking is important!
In Dubai a covered car park is essential. You wouldn’t want to leave your car outside in 50ºC even for a few minutes, so whether you want to live in the property yourself or to rent it out, make sure it has some type of a covered parking space.
What’s Available for Foreign Investors
Dubai is one of the few places in the world where you can buy freehold land. The 2002 Freehold Law gives foreigners the right to buy, sell and rent property in Dubai without any special regulations or permissions.
However, foreign buyers can buy property in Dubai only in certain areas. There are a few parts of Dubai where foreigners can only rent, yet, almost 90% of the best areas of the city are still available for purchase.
Freehold property is most popular and attractive property type international buyers looking to invest. However, freehold titles are only available in certain designated areas to non-UAE citizens.
Freehold ownership provides most complete and comprehensive right property ownership rights available in Dubai. It means that the buyer owns the property outright and ownership title will be registered in their name at the Dubai Land Department.
This kind of property is entirely yours, and can be sold or rented out freely.
If you are planning to buy a freehold property, make sure you deal with a property developer approved by the government.
Common Hold Properties
Apartments fall into common hold properties. As an apartment owner you have the right to buy, sell or rent the property, much like a freehold property.
However, common hold property owners are required to pay maintenance fees for the building and its common areas, which are most often owned by the developer.
A usufruct property is effectively a long-term lease.
It means that you have right to use and derive income or benefit from someone else’s property for a certain time period without causing any damage or destruction to the property.
The length of the leases ranges from ten years to 99 years for residential properties and 50 years for corporate properties.
Expats may lease a property for up to 99 years, but the ownership of that property will revert back to the landlord at the end of the lease period.
Expat property buyers must have at least a 25 % cash deposit for properties priced up to AED5 million and a 35% deposit for more expensive properties.
If you are buying off plan, you can borrow only up to 50% of your chosen property price.
It’s only when the property is complete and all the legal required occupation certificates have been obtained, you can borrow up to 75%of the purchase price.
In addition to the deposit, various other fees worth approximately AED77,000 can be added, including property agent’s commission, land department fee, registration fee, and bank and valuation fees, among others.
• Agent’s Commission
The standard property agent’s commission in Dubai is 2% of purchasing price.
• Registration Trustee Fee
Legally the process of transferring property seller to buyer takes place at registration trustee office. If the property is below AED 500,000, the trustee fee will be AED 2,000. For properties valued above AED 500,000 the trustee fee is double of that - AED 4,000.
• Dubai Land Department Title Deed Transfer Fee
Since 2004 property buyers in Dubai have to pay 4% of the purchase value to Dubai Land Department. The payment is made in the form of Manager’s check.
• Dubai Land Department Mortgage Registration Fee – 0.25% of the mortgage amount.
• Bank Fees – up to 1% of the loan
Off plan property buyers are also required to pay 4% Oqood Fee.
All in all, various fees put together can add up as much as 7% to the purchase price.
Buying Property through an Offshore Company
The reason why many investors choose to register a property in the name of an offshore company is mainly to establish a trust for tax and inheritance planning.
In January 2011 the Dubai Land Department (DLD) introduced a rule regulating offshore companies’ engagement in Dubai’s property market. The legislation allows only offshore companies registered with the Jebel Ali Free Zone Authority (JAFZA) to purchase property in Dubai.
Neither foreign companies nor other offshore jurisdictions are permitted to hold property assets in Dubai directly.
However, a foreign company can own a JAFZA offshore company. This is one of the most popular schemes where a trust, BVI or Cayman Islands company holds the shares of the JAFZA company that owns Dubai property.
Registering a JAFZA Offshore Company
Dubai through its Jebel Ali Free Zone Authority offers international business company (IBC) registration.
These companies are ideal for the business that does not require a local office. This includes any passive investment activity: holding shares in local or free zone companies, holding UAE real estate, or trading activities outside the UAE.
IBCs cannot rent office space nor can they apply for staff visas and they are not allowed to trade inside the UAE.
It’s relatively simple to set up a JAFZA IB company and there are plenty of specialist agencies in Dubai assisting foreigners in the process.
The rules are straightforward. The following is required while setting up a JAFZA company:
• A minimum of one shareholder. Corporate shareholders are permitted;
• A minimum of two directors. Corporate entities cannot act as directors. Details of directors are not available on the public register;
• A secretary. A company director may also act as company secretary;
• No minimum share capital;
• An auditor must be appointed from an approved list to work with the accounts.
What are the Advantages of a JAFZA Offshore Company
• No local shareholders required;
• Allowed to hold the shares of both Free Zone and Onshore (LLC) Companies;
• Can directly own Dubai property;
• Can hold multi-currency bank accounts in the UAE to carry out routine international transactions;
• The names of shareholders and directors are not disclosed on a public register;
Together with incorporation fees, registration fees and service fees, it can cost around AED15,000-18,000 a year. It is advisable to use a registered agent to help with the incorporation of the company and the opening of bank accounts.
When opening a bank account for your offshore company in Dubai, your physical presence is required. If it’s an inconvenience for you and a UAE based bank account is not a must, there is a possibility to open a non-UAE bank account. Some agencies assisting with offshore company registration in UAE offer this service, so it’s worth looking around for offers that will work best for your specific needs.
Setting Up a Business in Dubai
Onshore companies can be incorporated in Dubai under different forms among which are limited liability companies, private and public shareholding companies. Foreign companies can also register branch offices or subsidiaries as onshore companies in Dubai.
If you are planning to set up a company to conduct business in Dubai, depending on the nature of your business you will need to register either a Dubai company for operations within the local UAE market, or a free zone company which is the most popular choice for foreign investors.
Dubai limited liability companies must have at least one UAE national partner holding minimum 51% of the paid-up capital. This local partner with 51% of the company shares will receive a pre-defined fixed yearly remuneration.
However, they have no direct rights to the company and cannot interfere into the business of the company.
Free zone companies allow 100% foreign ownership with no local partners needed, hence they are the most popular solution for international investors.
As we have already mentioned, Dubai offers tax-free regime for international businesses and individuals resident in Dubai.
Effectively, by establishing yourself in Dubai, you will pay:
• No personal income tax
• No corporation tax for your company (unless you engage in oil and gas exploration, or set up a foreign bank branch)
• No capital gains tax
• No inheritance tax
• No sales tax
It is important to make sure that you personally comply with your country of domicile rules to be qualified as a tax resident in Dubai, otherwise in some circumstances you might still be liable for various forms of taxation in your country of domicile.
If you are tax resident in the emirate and have no tax obligations to any other country, you can potentially enjoy your income 100% free of tax in Dubai.
Other Taxes in Dubai
There is a form of council tax levied when you pay your utility bills, plus maintenance fees for local councils. There is a 10% municipality tax as well as a 5% municipality tax on rented accommodations collected through utility bills.
You are also taxed on any visit to a hotel in Dubai for a stay or a meal out. Tax adds 10% to your bill.
Alcohol is heavily taxed upon importation – it’s 50% to bring it into the country and then another 30% if you have a liquor license and buy alcohol for home consumption.
VAT has now arrived in Dubai as the IMF suggested it might be a good way for the UAE to diversify its economic resources. As of January 2018 VAT is levied at a rate of 5% with some limited exceptions including basic food items, healthcare and education.
Inheritance planning is very important for anyone investing in Dubai. Even if your major investments are in other jurisdictions, it is vital to protect your UAE bank accounts, a freehold property or any shares you have in the Emirate.
Local inheritance laws are complicated and can lead to a very unpleasant situation if no suitable arrangements have been made.
In such cases, a surviving spouse will not have immediate access to bank accounts even if they are held jointly in the names of both spouses.
In the absence of a registered will, the assets will be frozen until a UAE Court’s decision has been made. It can take quite a long time and the assets won’t necessarily be distributed the way you would want to be.
Therefore, it is vital for Dubai residents having UAE bank accounts, a freehold property or shares in this country to do proper inheritance planning.
Holding Assets in an Offshore Company
One way to protect your estate in Dubai is to hold your assets under an offshore company.
In case one of the shareholders passes away, the assets will still belong to the company and will be dealt with according to the company’s Memorandum of Association.
Thus, spouses shareholders in the company can make sure that in an event of one of them passing away, the other will remain an owner of the assets. This arrangement also allows owners to transfer shares into a trust if applicable.
Registering Your Will with the DIFC Wills and Probate Registry
There is a less costly way to protect your estate in Dubai.
From May 2015 Non-Muslim individuals over 21 years of age can register a will in the Dubai International Financial Centre Wills and Probate Registry. The will covers assets located in the Emirate of Dubai and/or Ras Al Khaimah.
The Dubai International Financial Centre (the DIFC) is a common law jurisdiction, and the Wills and Probate Registry’s Rules broadly follow UK law and practice.
Registering your will with the DIFC Wills and Probate Registry create legal certainty as to how exactly your estate will be distributed after death.
You do not have to be a resident of Dubai in order to register a will at the DIFC Wills and Probate Registry, any eligible individual with assets in Dubai can do so.
Dubai Double Taxation Treaties
There are about 80 double tax treaties between the UAE and other countries including OECD countries.
Some of them are exceptionally attractive for businesses and entrepreneurs, as they effectively reduce tax burden or, in some cases, exempt participating companies from tax liabilities.
The examples of such DTTs are the treaties with New Zealand, Austria, the Netherlands and Cyprus.
The treaty with the Netherlands, for example, limits the dividend withholding tax rate to just 5% for the Dubai companies. On the other hand, for most types of income the Netherlands will exempt Dutch companies from corporate tax on UAE income even though it has not been taxed in the UAE.
In short, if your country of residence has a DTT with Dubai that uses exemption method, it will be extremely beneficial for you to invest in Dubai, as your company will effectively have no domestic taxation of its business profits derived from the UAE.
Dubai is rising in popularity as a sophisticated zero-tax jurisdiction among international individuals and companies. It is also one of the most sought after places for professional expats to work in as it gives them the opportunity to enjoy tax-free salaries and build up their wealth.
In recent years Dubai has been attracting the attention of entrepreneurs and businesses looking for a jurisdiction to register an offshore company or start a new business.
The government of Dubai is keen to promote business development and persuade innovation, energy and tech start-ups to choose Dubai as their HQ. The main advantages are zero-tax regime, highly-developed infrastructure, business-friendly environment and security.
Compared to other zero-tax jurisdictions, it is fairly easy to set up a business in Dubai. Some prime benefits of operating from a Dubai Free Zone include 100 percent foreign ownership, no restrictions on hiring foreign labour, streamlined procedures for dealing with government formalities and usually a guarantee against future imposition of taxation for a specified period.
It is much easier and quicker to access banking services and get a business bank account when registering an offshore company in Dubai than in any other popular offshore jurisdiction such as Belize, Seychelles, Panama and BVI.
In addition, in Dubai you always have an option to upgrade the offshore company and register as an onshore company which would also enjoy zero taxation.
Both offshore and onshore Dubai companies can open accounts in UAE banks.
All the factors above increase Dubai’s attractiveness for investors, giving it the potential to become one of the most attractive and popular offshore jurisdictions globally.