The middle eastern country of United Arab Emirates is becoming one of the more appealing destinations for international contractors, given its warm climate, booming tech sector, and multinational community. Although the cost of living is high, that is offset by the fact that wages are high as well, and there are no income taxes, allowing workers to retain nearly 100% of their earnings.
Before you start looking for clients in the UAE, you will need a full understanding of visa requirements and the best way to offer your services. This guide will outline the basics to ensure that you comply with UAE business and immigration laws
What visas do I need to be a contractor in the UAE?
A work visa is required for foreign contractors in the UAE, and there are several options. Some clients may be willing to sponsor your visa as an employee, but that will mean giving up some independence and requiring a commitment to one company.
It is also possible for a client to sponsor you as a self-employed, but they may charge you a fee for the favoured tax, up to 10% of your earnings.
There is a Freelancer Permit available, but it may be restricted to certain industries such as technology or media. You would also have to work in one of the free zones, such as Dubai or Abu Dhabi, and each zone has its specific industry. The price will range from AED 15,000 to AED 20,000 (USD$4000-$5000), so it’s not an inexpensive option.
How do I get paid as a contractor in the UAE?
There are a few options for contracting and getting paid in the UAE, and the best one will depend on your commitment to the country and ability to handle all the details on your own.
Work as a freelancer
Many contractors will work as freelancers, which can also be structured as a sole proprietorship. This allows you the freedom to contract with multiple clients and take time off when you wish. If you can overcome the visa requirements on your own, then this is the most flexible option.
Your clients will contract with you directly, and pay based on time or project completion. This does require some mutual trust, and it helps if you can demonstrate your contracting experience in other countries.
Set up your own limited liability company in the UAE
You won’t be able to work under a foreign-registered company, but you can set up an LLC registered in UAE. You will need to obtain a trade license in the free zone of your industry, and go through the visa process with a licensing agent.
Your LLC will contract with the client, and all earnings and expenses will pass through the business entity. Your LLC will pay you as an employee, and there is no corporate tax to worry about.
Work with an umbrella company in the UAE
If you want to work as a freelancer and need a visa sponsor you may consider working with an umbrella company. The umbrella company is an intermediary to the contract, to facilitate payments from the client and assure them the job is being completed as promised.
Once payment is remitted by the client, the umbrella company will issue you a payslip. They may also be able to sponsor your work permit.
How do taxes work for contractors in the UAE?
One of the reasons UAE is popular with both skilled contractors and employees is the fact that there is no income tax. However, depending on the rules in your native country, you may still need to pay taxes at home.
Tax rates
There is no personal income tax in the UAE, and corporate tax is only imposed on oil companies and banks. There is a 5% VAT imposed on earnings over AED 375,000, but there may be exemptions in some tax-free zones.
Tax residency rule in the UAE
The UAE does use the 183-day rule to establish tax residency but does not tax global income. They will issue a tax residency certificate for those who wish to avoid paying taxes in their home country.
How to file taxes in the UAE
There are no tax filing requirements.
What are the social security contributions in the UAE?
The UAE does not require social security contributions from foreign workers, but you may need to show you have medical insurance.
Can I work remotely for a company in the UAE from my home country?
If you have problems getting a visa, or simply prefer to live in your home country, you can still work for UAE clients remotely if the role permits. This option has grown in acceptance in the past year, as even major companies begin to embrace remote work options for certain positions. The demand for skilled workers in the UAE during the pandemic may make this an even more viable option.
Your client would have to agree to it, but if you have the right talent and can arrive at a beneficial work structure then it is worth considering. You would still invoice them from your home country based on time spent or project milestones, and the client would remit cross-border payment to you. All taxes and contributions would be based on your home country criteria, and the client would have no other compliance requirements.
How do I stay compliant while contracting in the UAE?
As a foreign contractor, you will be concerned about compliance with UAE law and regulations, as you are working and living within its borders. Your primary compliance risks are:
- Business registration and trade licenses for limited companies
- Work visa validity and sponsorship for freelancers
- Having required health insurance
That is a lot to overcome, especially for new contractors, and you might need the help of an umbrella company to take over many of these tasks. Contractor Taxation has licensed, verified umbrella companies in UAE who are ready to assist you with setting up your contract and making sure that your payments are secure. Here are some of the benefits of using an umbrella company:
- Handles all client payments for you
- Issues you a payslip each month, to a UAE or foreign account
- Can sponsor work permits for freelancers
- Helps set up the UAE contract with the client
- Moderates any disputes with your client
Unless you are prepared to handle all of this on your own, you may find that an umbrella company is a valuable partner in the UAE as you embark on your contracting journey in a new country. Please contact Contractor Taxation with your questions about how an umbrella company can work for you.
