UAE tops world expat destinations

The United Arab Emirates is the world’s top destination for expatriates in terms of personal taxation, according to a new study.

Mercer’s ‘Worldwide Individual Tax Comparator Report’, a global survey of expatriate hotspots, looks at tax and benefits systems across 32 countries, focusing on personal tax structures, average salaries and marital status. Data from the survey is used by multinationals to structure pay packages for their expatriate and local market employees.

For single managers, the UAE has the most attractive tax environment according to the percentage of net income available, the survey finds. The country earns its no. 1 ranking by not assessing income tax, with social security contributions amounting to just 5% of a local employee’s gross salary.

Markus Wiesner, Mercer's head of operations in Dubai, said "We often find that the UAE's zero taxation is a strong draw for expatriates on short-term assignments. For three to five years, young professionals can fast-track their savings to afford a mortgage when they return home, while senior executives can maximise their savings potential ahead of retirement. It's in these particular groups that we get a really good mix of expatriate talent in Dubai."

According to Wiesner, the survey does not bear out perceptions of Dubai as a relatively expensive destination. “It ranks alongside many European countries that, in contrast, demand high tax contributions” he said. “Clearly, accommodation costs are a reality but other expenses are exceeded in most other leading commercial centres in the West.”

Russia, ranked second, applies a flat tax of 13% across all income levels, while Hong Kong makes third position with taxes and social security contributions at 14.2% of gross base salary. It is followed by Asian markets Hong Kong, Taiwan, Singapore, South Korea and China.

European countries dominate the bottom of the list, with the UK in 14th place, followed by Ireland (18), Spain (19) and Switzerland (21). France and Germany are ranked 22 and 29, respectively.

Single managers in Hungary (30), Denmark (31) and Belgium (32) pay, respectively, 48.5%, 48.6% and 50.5% of gross income in taxes and social security contributions.

Consultant Brian Waite said in a press release, “Local taxation is one of several factors that multinationals take into account when deploying staff across the globe. It has an obvious impact on take-home pay, and in some countries with low or zero tax rates it is an important incentive for employees to work abroad. In other high-tax destinations, multinationals need to create compensation packages that at least match their expatriates’ purchasing power in the home country”.

Other important considerations for expatriate allowances are housing, private schooling and the local cost of living adjustments, he added.

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READERS' COMMENTS

"zero" taxation
Posted by The Consultant, Dubai, UAE on Tuesday 20 November 2007 at 09:00 UAE time


SP, why do you think it is unfair for expatriates to remit savings to their home country? Where do you think this money comes from in the first place? The UAE's wealth is paid for by foreign countries and companies, through the UAE's oil exports. A secondary source of income is tourism, again foreign money being brought in to the country. So if some of that then goes out again as expatriate remittances, I think this is perfectly fair. 
 
Let's also not forget the fact that the UAE retains plenty of our earnings in various ways, some good (entertainment, shopping etc), some less pleasant (rent, government fees). Overall, the article makes a fair point - those in the early stages of their careers, with limited expenses, and older expatriates in highly-paid senior positions can probably still save quite well in the UAE. Anyone in between, especially families with major housing and schooling expenses, is probably struggling at the moment.

zero taxation
Posted by SP, Dubai, UAE on Monday 19 November 2007 at 10:00 UAE time


I dont think Zero Taxation is no more valid any more in the country as the rents are so steap with no control over the increase every year, tax would have been better choice. Expats pays nearly 2/3 of his salary on rent alone if he decides to keep his family member with him. Labour turnover will be ever more incoming years due to this reasons as many has to sacrifice family status as they cant afford to even keep their immediate family together.  
 
But all the same, Dubai has always provided the luxury for the upper class group. End of the day it is all about choice one makes.  
 
I personally think, Dubai must come up with a personal tax plan to generate income, as it is unfair to just earn and spend your earning outside the source country. As most expats wish to save or spend in their home country and this eventually will deplete the resources in the country they work. Perhaps this is one among several resons why we find rent hikes and in direct increases in daily consumable produtcs which is only to get the expats spend more here than sending abroad. A balance has to be achieved.

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