Moving your business to Dubai – UK Tax Planning and Important Considerations

The allure of Dubai, with its sun-drenched beaches, towering skyscrapers, and a tax regime that seems almost too good to be true, is drawing an increasing number of Brits to its shores. At ESDG Accountancy, we’ve noted a significant uptick in clients contemplating a move to Dubai, attracted not only by the prospect of a luxurious lifestyle but also by the advantageous tax benefits.

Recently in the UK we have seen rising corporation and dividend tax rates, combined with high inflation and interest rates – making a move to Dubai seem ever more attractive for business owners.

When considering if this move is right for you, it is important to understand the full impact of both UK and Dubai tax on your business, to ensure you are not walking into a tax trap or invertedly not following tax laws. A full understanding of UK tax laws in relation to such a move is crucial for making an informed decision.

In this guide updated for 2024, we dive into the essentials of relocating to Dubai, focusing particularly on the tax implications for UK residents and business owners.

Understanding the Tax Landscape: Moving to Dubai from the UK

Tax Considerations for UK Expatriates in Dubai

1. The Appeal of a Tax-Free Salary: Dubai’s promise of a tax-free income is of course enticing. However, here are some critical considerations:
   
   
   • Non-Resident Status in the UK: Achieving non-resident status is key to ensuring your income in Dubai remains untaxed by the UK. Determining tax residency can be complex, particularly if you plan to travel between countries frequently. If you have relocated to Dubai, you will often need to keep a strict log of your whereabouts to ensure you do not “accidentally” become a UK tax resident again. ESDG Accountancy offers expert evaluations to ascertain your residency status and guide you towards achieving non-residency for future tax years.
     
     
   • Income from UK Sources: Should you have income streams within the UK, such as rental earnings, these may still fall within the UK’s tax jurisdiction. It’s essential to communicate your departure to HMRC or register as a non-resident landlord. It may not be possible to escape UK tax for all of your income sources.
     
     
   • Capital Gains Tax (CGT): For non-residents, certain capital gains within the UK may still be taxable, particularly gains from the disposal of UK property post-April 2019. While other assets generally fall outside CGT, returning to the UK at a later date could trigger tax liabilities. Future tax planning is important, particularly when the transaction values are high.
     
     
   • Transferring Funds to the UK: For most individuals not taxed on a remittance basis, moving your Dubai-earned income back to the UK typically bears no tax implications – however the details of this can be complex and can be easily misunderstood. If you are of UK Domicile (i.e. being born in the UK would indicate this) it is not possible to take advantage of the non-domicile remittance basis.
     
     
   • Where is your business controlled from: Often misunderstood, it is often only possible to move your business to Dubai and take advantage of their low tax rates if it is operated and controlled from Dubai itself. It is not possible to simply run your business remotely from the UK and expect to pay no tax. Not all advisors are upfront about this aspect but we believe it is important the client understands this early on.
     
     
2. Planning for Retirement: Relocating can significantly impact your retirement strategy:
   
   
   • UK Pensions: Pensions from the UK may still be taxed domestically. It is recommended to seek specific tax advice here before drawing from the funds. ESDG Accountancy works closely with regulated financial advisors who specialise in these areas.
     
     
   • Aligning Retirement Goals: It’s vital to adapt your retirement planning to fit Dubai’s financial landscape, consulting with specialists for a seamless transition.
     
     
   • Inheritance Tax (IHT): UK domicile status can influence your estate’s liability to UK IHT on global assets. ESDG Accountancy can assist in clarifying your domicile status and its implications.
     
     
3. Health and Insurance Needs: Ensuring adequate health and insurance coverage is paramount:
   
   
   • Mandatory Health Insurance: Dubai requires all residents to have private health insurance. Exploring suitable options is crucial.
     
     
   • UK Insurance Policies: Review and adjust your life, critical illness, and income protection policies. Policies established in the UK may not extend to your life abroad.
     

Comparing Tax Rates: UK vs. Dubai

When considering a move from the UK to Dubai, one of the most compelling aspects to explore is the stark difference in tax regimes between the two locations. The UK operates a progressive tax system where individuals are taxed on their income, with rates ranging from 20% for basic income earners to 45% for those in the highest income bracket. Additionally, residents may be subject to Capital Gains Tax (CGT) and Inheritance Tax (IHT), depending on their assets and estate value.

Conversely, Dubai offers a tax environment that is significantly more favorable to individuals and businesses alike. The most notable benefit is the absence of personal income tax, meaning that salaries and wages are received in full, without deductions for tax purposes. This difference alone can substantially increase disposable income for residents. Furthermore, there is no CGT or IHT, making Dubai an attractive destination for wealth accumulation and transfer.

Understanding Controlled Foreign Company (CFC) Rules

For UK residents contemplating a move to Dubai, it’s also crucial to understand the Controlled Foreign Company (CFC) rules, which can have significant implications for tax liability on foreign income. The UK’s CFC rules are designed to prevent UK companies from artificially shifting profits to offshore subsidiaries in low-tax jurisdictions to reduce their UK tax liability.

Under these rules, if a UK resident controls a foreign company, and certain conditions are met, the profits of that foreign company may be attributed to the UK resident and taxed in the UK. This means that, despite the attractive tax regime in Dubai, profits retained in a Dubai-based company could potentially be subject to UK tax if the UK resident has significant control over the company and the company’s profits are artificially diverted from the UK.

Living and Thriving in Dubai

1. Cultural Integration:
   
   
   • Dress and Behavior: Adhering to modest dress codes and respecting local customs, especially during Ramadan, facilitates smoother cultural integration.
     
     
2. Visa and Residency:
   
   
   • Understanding UK and UAE Requirements: Familiarising yourself with both nations’ guidelines ensures a smoother visa application process and understanding of residency criteria.
     

You should familiarise yourself with the UK Government Guide on living in the United Arab Emirates.

Frequently Asked Questions

• Can you help me move my business to Dubai?
  Yes – firstly we will understand your situation in full so we can assess if this is the correct solution for your business and beneficial from a tax point of view. Once you are happy this is the best course of action for you and your business we can start the proceedings to put plans into place, helping you set up a Dubai freezone company etc.
  
  
• Is there a UK-UAE Double Tax Treaty?
  Yes, this treaty aims to prevent double taxation, offering benefits for individuals and businesses in both countries.
  
  
• Is this legal?
  Yes, ESDG Accountancy is a Chartered Accountancy firm and will only recommend tax strategies which are above board and fully legal in both countries concerned. We will advise you on what you need to be aware of to stay complaint for the future.
  
  
• Will I Pay UK Tax After Moving to Dubai?
  Your tax liability in the UK depends on your residency status and UK-sourced income. Non-residents typically do not pay UK tax on Dubai-earned income, and we will provide you with the correct advice so you can take advantage of this in full whilst remaining fully complaint with the law.
  
  
• Can I Retire in Dubai as a UK Citizen? Absolutely, Dubai is a popular retirement destination for its lifestyle and tax perks. Proper planning around visas, healthcare, and finances is essential and we can assist with this.
  

Next steps:

The journey to Dubai is filled with opportunities but requires thorough planning, especially regarding UK tax implications. ESDG Accountancy stands ready to navigate you through the intricacies of tax planning for non-residents, ensuring a smooth transition to your new life in Dubai. Please get in touch with us to speak with a Chartered Accountant about moving your business to Dubai.

Your very own Dubai legend is about to unfold! A world of dreams and adventures in Dubai awaits! Let’s go!

CONTACT US FOR A FREE CONSULTATION ON MOVING YOUR BUSINESS TO DUBAI: