Contractor's guide to contracting in Dubai
The prospect of tax-free earnings is often understandably high up the list when UK contractors come to consider overseas contacting.
Also dangle the possibility of a reasonably opulent lifestyle and you can see why Dubai sounds like a must to many a contractor, writes Kevin Austin, managing director of Access Financial.
So what are the visa, permit and labour requirements of contracting in Dubai and, despite it sounding like a no-brainer for your next contracting stint abroad, is it actually for you?
The UAE comprises seven Emirates (similar to states). Abu Dhabi is the administrative capital of the Emirates but Dubai is the business centre of the country and most well-known to foreign workers.
Dubai ranks very highly on many indices, including employment growth rate and GDP per capita, making it a very attractive destination for international workers. The relatively high levels of pay are -- as mentioned -- tax-free. This status enables Dubai to attract highly-skilled contractors who typically earn substantially more there, than in their country of origin. This is most ideal for contractors who may spend periods of time between contracts, as a stint in Dubai very often leaves plenty of money to cover a subsequent period of joblessness. You’d probably expect nothing less from the ‘City of Gold’ – Dubai’s nickname.
In-country lifestyle and culture
Dubai has a very diverse and international community with various nationalities (over 200) and cultures living in harmony. Over 75% of the country are expatriates. The official language of the government and its entities is Arabic, however English is the working language for all business purposes and is a widely spoken throughout the country.
Life can be expensive, but it is easily possible to achieve a high quality of life for less than in the UK -- particularly when the tax saving is factored in. The UAE is a very safe country for foreign visitors and has one of the lowest homicide rates in the world -- lower than most Western European countries, including the UK. The UAE uses the Gregorian calendar with the normal working week from Sunday to Thursday (Friday/Saturday - weekend). Beautiful beaches, coupled with ample offerings for a social life, are also valued by expatriate workers.
The UAE is also a relatively tolerant country where citizens can freely practice their faith (churches, mosques and temples are available in all major cities). Access to alcohol and pork is also available to all non-Muslims. There are no restrictions on women working, driving or having to wear religious clothing. International schools are plentiful and of a very high standard. They are available from nursery to end of secondary school. Studies can be undertaken according to the British, American, International Baccalaureate or the Indian curriculums. Specific language schools for French, German and Japanese students are also available in Dubai. Apart from local universities, universities with affiliation to foreign entities are also available e.g. Paris-Sorbonne, New York University, Middlesex University and Heriot Watt.
With four major airlines specific to the country (Emirates, Etihad, FlyDubai & AirArabia) and four international airports, access to and from the country is never an issue.
Medical facilities for in-patient or out-patient requirements, be it just a clinic or fully-fledged hospitals, with doctors from all parts of the world performing the most complex procedures, are available.
All of these make Dubai a very attractive destination to live and work in.
And while it is technically possible to operate via a Personal Service Company in Dubai, most UK contractors elect to operate through an umbrella company or else are engaged directly as an employee of the end-user. The PSC would need to be registered in the UAE (a British domiciled company would not be compliant), and given that earnings are tax free anyway, would impose an administrative burden on the contractor while offering few benefits.
Visas and work permits
If you want to spend any length of time in UEA, you will need to apply for a visa.
Broadly-speaking, you will need a work permit and residence visa and an Emirates ID card. Your employer should apply for the visa for you. If granted, the visa is valid for up to two years. To get a residence visa for your family, you will need to show you earn at least AED4,000 (£288) a month.
Obtaining a work visa involves MoHRE (Ministry of Labour) and the General Directorate of Residency and Foreigners Affairs (GDRFA - Ministry of Immigration). The process is as follows:
1. Approval from Ministry of Labor
First, the prospective employer must obtain approval from the Ministry of Labour on behalf of the potential employee, specific to the job designation applied for. This requires attested certificates/degrees from the country of origin with validation from the Ministry of Foreign Affairs.
2. Entry Permit
Then, The Ministry of Immigration issues a Work Entry Permit Visa which is also called a ‘Pink Visa.’ The Work Entry Permit Visa allows the applicant to enter the UAE. This permit is valid for 60 days from the date of issue. Once an employee enters the country using the Entry Permit Visa, his/her Resident Visa needs to be processed by the Employer (the umbrella company or direct employer) within 60 days of entry. It takes approximately two weeks to be issued a Work Entry Permit Visa
3. Labor Card
After the applicant enters UAE, the employer will draw up a Labour Contract and start the process for the Labor Card which is valid for two years. This involves a simple medical test carried out by authorised centres.
4. Resident Visa
Once the Employer has your Medical Fitness Test, they will process your Resident Visa as an Employee. Your Passport will get stamped with the Work Visa for the Emirate you are employed in. Medical insurance for the employee is also provided by the employer and is mandatory for the issuance of a Residence Visa. It takes approximately three weeks to receive the Resident Visa after arriving in Dubai.
5. Emirates ID
Along with your passport being stamped with your Resident Visa, you will be issued with an Emirates ID card.
6. Spouse & Children
Once the Resident Visa is stamped on the employee’s passport, the employee may also sponsor dependents such as a spouse and children. This process requires an attested marriage certificate of the spouse and birth certificates for children from the country of origin. Sponsorship of dependents also require a certain minimum salary as stipulated in the Labour Contract, proof of residency (valid tenancy contract).
All of the above work is done by the employer and online, with only a visit to the health centre required by the employee for the fitness/medical test.
Payment of regular salaries as per the Labour Contract to Employees are secured by the Wages Protection System whereby the Ministry of Labour monitors the payment of the employee by the employer on a monthly basis. There is no government stipulated pension scheme, so any pension contribution must be voluntary and a private scheme selected by the employee.
There is, however, an end-of-term benefit (Gratuity) which is an amount payed by the employer to the employee based on the basic salary and number of years in service after the end of service. There is a maximum of 6 months probationary period during which time either party (employer/employee) can terminate work without a notice period. Beyond the probationary period, a minimum of one-month notice must be given by either party for termination of contract. It is then the employer’s duty to cancel the Resident Visa of the employee and make sure they leave the country within 30 days of cancellation, unless the employee gets hired by another employer.
Work/Residence Permit: $6,000 USD plus 2 month’s salary deposit as required by UAE law (costs can vary depending on the individual personal situation).
There is an additional fee for the second year.
If the contract does not include a return flight ticket, $1,000 USD will be charged on top of the work permit cost.
Liability of tax in country of origin
While earnings in Dubai are tax free, this is unlikely to be the case in the contractor’s country of domicile, which may have a claim to tax any earnings. In the case of the UK, the tax residency of the contractor will determine whether they must pay tax on untaxed income.
Under the new UK-UAE tax treaty, Article 4 allows for the determination of residency under treaty rather than relying solely on UK domestic rules. Notably, an individual is considered resident of the UAE if they are domiciled in the UAE, have habitual abode in the UAE or if their centre of vital interests is in the UAE. When an individual is both resident in the UK and UAE, treaty residence is determined by looking at the normal treaty tie breaker ties (permanent home, centre of vital interests, habitual abode and nationality) and if all inconclusive by seeking mutual agreement between the tax authorities of the UK and the UAE. Individuals resident in the UAE now have the opportunity to claim treaty non-residence in the UK (providing they meet the conditions) and exempt UAE source earnings from UK tax even if they remain UK tax resident under the UK’s statutory residence.
While Dubai, with its promise of tax-free earnings, opulence and searing desert sun may seem like a paradise to many contractors, it does not appeal to all tastes, particularly as a long-term destination.
Unlike many warmer climes with large expat communities, people in Dubai are overwhelmingly there to work, so social circles can be transitory. Despite being very open to foreigners, it is at its heart still a fairly conservative society -- much more so than anywhere in Europe -- and punishments for seemingly minor social faux pas can be severe. With the right attitude, however, Dubai can be an exciting and highly remunerative place to work.
Editor's Note: You can search for jobs in Dubai here