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.