Working in the UAE generally means paying no taxes. This makes contracting in the Emirates an especially exciting opportunity, but there are some immigration and banking logistics that can still be time-consuming.
How does (the lack of) UAE tax affect my earnings?
You won't have to pay local tax in UAE. If you work through an Umbrella Company, they can write a contract with your client or recruitment agency, invoice them for your earnings, and pay you on the same day they receive the funds. This means you can quickly receive 100% of your gross earnings directly into your nominated bank account.
Offshore payments for contractors in UAE
Many freelance workers opt to be paid in offshore accounts. Regardless of where you’re paid, you still need to pay your appropriate social security and taxes. However, these accounts often afford more flexibility and privacy than local accounts. Many offshore establishments are also experienced in working with international clients.
Your contract, your work, and the tax law of your home country can all influence whether or not offshore payments are the best option for you.
To sort this out, your simplest option is working through an Umbrella Company that specialises in offshore payments. Not only can they help you determine whether you’re eligible to work tax-free, they can get you set up with an offshore account.
This combines the benefits of a standard Umbrella Company with a deep understanding of international tax:
- Local payroll if required
- Low management fees
- Minimal administration requirements for the contractor
- Fast payment processing
- All necessary insurances and registrations (e.g. Professional Indemnity and Public Liability Insurance)
What about taxes in my country of residency?
You need to figure out whether you have a personal tax liability in your country of tax residency. This is based on your earnings declarations and employment status. Several factors can influence your tax residency:
- Your visa status might prevent you from being tax resident.
- You might not be in the country for sufficient time. Many countries require a stay of 183 days before you are tax resident.
- You might be working in a tax-free zone, such as an offshore oil rig.
The tax laws of the country where you are tax resident will determine what you owe. Tax law can be extremely complex and staying compliant while optimising your earnings can be tough. As a result, it’s critical to get expert advice. An expert will help you understand your requirements, such as:
- if you can take advantage of a dual taxation agreement between the two countries.
- if you can offset earnings against expenses.
- if you can use pension contributions as a tax efficient means of reducing your tax liability.
- if it’s better for you to be employed, to work through a local Umbrella Company, or to setup your own Limited Company.
- whether a trust scheme will help reduce your tax liabilities.