Tax issues - working in UAE
Discussion
Dear all
This is likely to be the first of several questions about living/working in UAE so I thank you for bearing with me
I am currently in the process of applying for a 2 year posting to Dubai. If I'm succesful its likely that me and my family will move there for 2 years. The salary is approx £40k with no local taxes, compared to the £60k I'm on now. Cash wise I'm not better off - the main selling points are housing & car allowance, free private health & education, and the change in lifestyle. Its a lot to think about and I'm weighing up the various pro's and cons.
The first question is - will I have to pay UK tax on UAE income?
As usual all advice and info appeciated.
This is likely to be the first of several questions about living/working in UAE so I thank you for bearing with me
I am currently in the process of applying for a 2 year posting to Dubai. If I'm succesful its likely that me and my family will move there for 2 years. The salary is approx £40k with no local taxes, compared to the £60k I'm on now. Cash wise I'm not better off - the main selling points are housing & car allowance, free private health & education, and the change in lifestyle. Its a lot to think about and I'm weighing up the various pro's and cons.
The first question is - will I have to pay UK tax on UAE income?
As usual all advice and info appeciated.
If you're there for exactly or over 2 years - then no. You will have completed at least 1 full tax year as a non-resident in that case. Assuming you don't spend more than the allowed time in the UK etc.
You're still liable for income in the UK - e.g. rent, interest etc.
What package have you agreed, they vary wildly.
You're still liable for income in the UK - e.g. rent, interest etc.
What package have you agreed, they vary wildly.
If you remain outside the UK for a complete tax year, you should not be liable to any UK tax on UAE income earned in that tax year. During that year, you can return to the UK for short breaks which cannot exceed 90 days and not lose your non-UK tax resident status.
Your UAE employer might have some in-house tax advisors who can tell you how things work.
Your UAE employer might have some in-house tax advisors who can tell you how things work.
Thanks folks
Mattt - package not agreed yet. The consultant didn't see fazed when i told him what I was currently on and he did say there was lots of scope for negotiation so here's hoping.
Eric Mc - I'll be working August to August. Any chance I may get a rebate for 2010/11 as I will have overpaid when I move ? i.e.
April - July earnings to be taxed at 40%
August - March earnings hopefully not taxed as living in UAE
Ideally my earnings between Apr-July will be sporead over the full financial year and (hopefully) I may get a refund. Any ideas?
Mattt - package not agreed yet. The consultant didn't see fazed when i told him what I was currently on and he did say there was lots of scope for negotiation so here's hoping.
Eric Mc - I'll be working August to August. Any chance I may get a rebate for 2010/11 as I will have overpaid when I move ? i.e.
April - July earnings to be taxed at 40%
August - March earnings hopefully not taxed as living in UAE
Ideally my earnings between Apr-July will be sporead over the full financial year and (hopefully) I may get a refund. Any ideas?
You should be able to claim split year treatment for that year.
You'd be best off running the package past a few PHers in the Middle East section before you agree. Companies will generally try and stiff you on your first package, only once you've got some local knowledge you know what to ask for
You'd be best off running the package past a few PHers in the Middle East section before you agree. Companies will generally try and stiff you on your first package, only once you've got some local knowledge you know what to ask for
Countdown said:
Thanks folks
Mattt - package not agreed yet. The consultant didn't see fazed when i told him what I was currently on and he did say there was lots of scope for negotiation so here's hoping.
Eric Mc - I'll be working August to August. Any chance I may get a rebate for 2010/11 as I will have overpaid when I move ? i.e.
April - July earnings to be taxed at 40%
August - March earnings hopefully not taxed as living in UAE
Ideally my earnings between Apr-July will be sporead over the full financial year and (hopefully) I may get a refund. Any ideas?
It seems you will be straddling two separate tax years which means that you won't fulfill the "complete tax year abroad" criteria to qualify as a non-UK Tax resident.Mattt - package not agreed yet. The consultant didn't see fazed when i told him what I was currently on and he did say there was lots of scope for negotiation so here's hoping.
Eric Mc - I'll be working August to August. Any chance I may get a rebate for 2010/11 as I will have overpaid when I move ? i.e.
April - July earnings to be taxed at 40%
August - March earnings hopefully not taxed as living in UAE
Ideally my earnings between Apr-July will be sporead over the full financial year and (hopefully) I may get a refund. Any ideas?
That means you could be liable to UK tax on this UAE income with credit being given for any UAE tax paid - depending on whatever Double Taxation Agreement exists between the UK and the UAE.
However, you might be eliguible for the "split year treatment".
I am not an overseas tax expert and you probably need to speak to someone who specialises in this area. As I suggested, does your UAE employer not provide this type of information?
HMRC 6 is the standard Revenue "bible" on what Residence and Domicile for Tax Purposes actually means and makes no mention of "Split Year Ttreatment". The reason why it is not mentioned is because "Split Year Treatment" is not, strictly speaking, within tax law. "Split Year Treatment" is a "concession". In other words, HMRC waives the strict legal interpretation of their own regulations. The details of hopw "Split Year Treatment" is handled is contained within an HMRC note called ESC A11 (ESC stands for Extra Statutory Concession).
From what I have read, ESC A11 WOULD apply in your circumstances as there is no obvious attempt to manipulate events or payments to happen within or outside certain dates just to avoid tax. Your situation seems fairly straightforward and I would expect that HMRC would not object to ESC A11 being applied.
However, as I have now said three times, you may need to obtain the opinion of a tax professional who deals with these ttypes of situations on a regular basis.
From what I have read, ESC A11 WOULD apply in your circumstances as there is no obvious attempt to manipulate events or payments to happen within or outside certain dates just to avoid tax. Your situation seems fairly straightforward and I would expect that HMRC would not object to ESC A11 being applied.
However, as I have now said three times, you may need to obtain the opinion of a tax professional who deals with these ttypes of situations on a regular basis.
Eric Mc said:
HMRC 6 is the standard Revenue "bible" on what Residence and Domicile for Tax Purposes actually means and makes no mention of "Split Year Ttreatment". The reason why it is not mentioned is because "Split Year Treatment" is not, strictly speaking, within tax law. "Split Year Treatment" is a "concession". In other words, HMRC waives the strict legal interpretation of their own regulations. The details of hopw "Split Year Treatment" is handled is contained within an HMRC note called ESC A11 (ESC stands for Extra Statutory Concession).
From what I have read, ESC A11 WOULD apply in your circumstances as there is no obvious attempt to manipulate events or payments to happen within or outside certain dates just to avoid tax. Your situation seems fairly straightforward and I would expect that HMRC would not object to ESC A11 being applied.
However, as I have now said three times, you may need to obtain the opinion of a tax professional who deals with these ttypes of situations on a regular basis.
Cheers Eric From what I have read, ESC A11 WOULD apply in your circumstances as there is no obvious attempt to manipulate events or payments to happen within or outside certain dates just to avoid tax. Your situation seems fairly straightforward and I would expect that HMRC would not object to ESC A11 being applied.
However, as I have now said three times, you may need to obtain the opinion of a tax professional who deals with these ttypes of situations on a regular basis.
That is helpful - will do as you suggest if things become more definite.Sod's law being what it is I'll probably not be offered the job or the recruitment consultant may have ben exaggerating the "package" available.
I live in UAE at the moment and on the provision your TOTAL housing incl DEWA (water electric + Municipality AKA council tax) + school fees (check waiting lists there HUGE for good schools)
Negotiate a car in that too, 24 months is not long enough to buy one and don't think for a second you can spend £5K and get something reasonable second hand! buy new or your renting/leasing
Car lease for a family car, and with the life endangering driving style you WILL need a 4x4
will be AED 5,000 per month.
On the asumption you're just left to buy food and entertain your self
AED 20,000 per month is do-able. This is an expensive town and don't expect to
save any money on 20K.
Having been here for 4 VERY enjoyable years I'm happy to answer any questions you may have.
just P.M me
Negotiate a car in that too, 24 months is not long enough to buy one and don't think for a second you can spend £5K and get something reasonable second hand! buy new or your renting/leasing
Car lease for a family car, and with the life endangering driving style you WILL need a 4x4
will be AED 5,000 per month.
On the asumption you're just left to buy food and entertain your self
AED 20,000 per month is do-able. This is an expensive town and don't expect to
save any money on 20K.
Having been here for 4 VERY enjoyable years I'm happy to answer any questions you may have.
just P.M me
Can see a couple of 'errors' in the thread....
OP mentions that he will be on 40K with 'no local taxes'.
Yeah, right. Try about 17% on eating/drinking out. 30% on your Booze. up to 100% on many standard UK supermarket items, a few quid 'registering' your car every year (which is akin to road tax), tax for passing under road tolls. Don't get me started on the 'your a white European and therefore I can double my quote' tax....
The other is a little less of a rant!
Matttt mentions that you get taxed on UK earnings while over here. Not true.
We used to let out our house when we first moved here and filled out a form (collected from the estate agent but was an IRS form) giving details of domecile out of the country and we never got taxed on the income. I have also just received a cash lump sum payment form a wound-up pension scheme which was taxed 40% but I have been given a form by the IRS to claim it back as I'm not living there.
Our FA out here has also told us that the tax man there cannot tax us on any savings brought back with us, monthly transfers to UK savings accounts etc - the only thing they can tax you on is earnings while living in the UK.
Oh, yes..... AED20K per month will dissappear quicker than a GS400 with black windows and gold rims...and that is bloody quick!
OP mentions that he will be on 40K with 'no local taxes'.
Yeah, right. Try about 17% on eating/drinking out. 30% on your Booze. up to 100% on many standard UK supermarket items, a few quid 'registering' your car every year (which is akin to road tax), tax for passing under road tolls. Don't get me started on the 'your a white European and therefore I can double my quote' tax....
The other is a little less of a rant!
Matttt mentions that you get taxed on UK earnings while over here. Not true.
We used to let out our house when we first moved here and filled out a form (collected from the estate agent but was an IRS form) giving details of domecile out of the country and we never got taxed on the income. I have also just received a cash lump sum payment form a wound-up pension scheme which was taxed 40% but I have been given a form by the IRS to claim it back as I'm not living there.
Our FA out here has also told us that the tax man there cannot tax us on any savings brought back with us, monthly transfers to UK savings accounts etc - the only thing they can tax you on is earnings while living in the UK.
Oh, yes..... AED20K per month will dissappear quicker than a GS400 with black windows and gold rims...and that is bloody quick!
If you have a UK property and are receiving rent on it WHILST YOU ARE NOT TAX RESIDENT IN THE UK, you may still be liable to UK Income Tax on that rent. Either the tennant or any agent you use to collect that rent on your behalf is obliged to deduct Income Tax at source at 20% on the rental income. You should be able to reclaim any such Income Tax (if appropriate) by completing a UK Self Assessment tax return.
The details of how Rental Income is handled for non-UK tax residents is explained in section 10.16 of the guidelines shown in the HMRC6 leaflet.
The previous poster keeps rererring to "domicile". Does he really mean "resident"? In tax law, there are strict legal distinctions between these two terms. The fundamental fact is that anyone born in the UK will ALWAYS be UK domiciled. Merely moving abroad (even on a virtually permanent basis) does not change your domicile.
There are very strict situations where a person can lose their domicile of birth but it is actually very difficult to do this.
The details of how Rental Income is handled for non-UK tax residents is explained in section 10.16 of the guidelines shown in the HMRC6 leaflet.
The previous poster keeps rererring to "domicile". Does he really mean "resident"? In tax law, there are strict legal distinctions between these two terms. The fundamental fact is that anyone born in the UK will ALWAYS be UK domiciled. Merely moving abroad (even on a virtually permanent basis) does not change your domicile.
There are very strict situations where a person can lose their domicile of birth but it is actually very difficult to do this.
Edited by Eric Mc on Tuesday 16th February 08:45
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