You are considering Dubai in your FIRE plan because it has no tax. Indeed, Dubai is very attractive with nice hot weather and no personal income tax. However, you will experience hidden fees everywhere which do really add up. Stay vigilant.
Dubai is the largest city in the United Arab Emirates. There are many pros to live there. One of the most prominent perks would be its absence of personal income tax, which is ubiquitous in most other countries. However, there is really no free lunch. Even in a state where there are vast reserves of oil and gas, services are not free for residents.
From the day you step off your plane to initiate your residency visa, to exchange your driver’s license, to everyday life when you rent a place, there are taxes fees. Let’s explore the world of ‘fees’ when ‘taxes’ are taboos.
Residency visa fees
As we discussed before, there are several options to become a resident in Dubai. If you are employed, your company will manage and pay for you visa. However, if you are planning to come on your own, you will need to sponsor yourself. Several paths exist: investing in real estate property, being a talent in a specific field, setting up a company, and establishing yourself as a remote worker.
Remote worker residency visa
We chose the latter option in 2022 as it was the cheapest path then. However, we have heard that the government is phasing out this scheme to favor the Green Visa scheme. All in all, the process costed us around 13,848 AED (or ~UD$3,770) for a family of 5 for a one-year visa. If you are interested in the details of the process, you can consult our post How to self-sponsor for residency in Dubai? Below is a recap of the fees:
Papa FC visa costs 2,695 AED (or ~US$733): 2,565 AED Remote visa fee when overseas, 26 AED typing service to change EID appointment, 104 Covid test before EID appointment.
Mama FC and 3 kids visa cost 11,153 AED (or ~US$3,036 or US$759 per person): 279 AED births certificates stamping at French Consulate, 224 AED Ejari, 525 AED birth certificates translations to Arabic, 804 AED Ministry of Foreign Affaires certification of Birth certificates attested by French Consulate, 4,560 AED Residency entry permit for Mama FC + 3 kids, 640 AED Mama FC change status, 323 AED Mama FC medical test, 343 AED Mama FC residency stamp, 142 AED for Mama FC’ EID, 99 AED Mama FC PCR test before EID, 1,916 AED kids’ status change, 783 AED kids’ residency stamps, 516 AED for kids’ EIDs.
You notice that my family’s visas are slightly more expensive than mine. Indeed, we had to pay a fee to change the visa status when we are already in the country on a tourist visa. An alternative would have been to do a ‘visa run’ to Oman. It would cost 35 AED per person to leave the country. Then enter Oman, and do a U-turn back to Dubai as a resident-to-be.
Company set-up
Another common path is to set up a company. There are plenty of offers, from affordable Free Zones, to the prestigious DMCC (Dubai Multi Commodities Center). If you have no interest and no plan to conduct a business, just go for the cheapest. If you are considering some consulting or other gigs, you should assess more carefully where you should register your business. The setup cost for a company starts from 14,000 AED (or ~US$3,800) with 1 residency visa for a Free Zone, and reaches 43,000 AED (or ~US$ 11,707) for DMCC.
Each extra family member that you sponsor will cost about 3,750 AED (~US$1,020 per person). The visa is usually valid for several years, so you can spread the cost. However, there are maintenance fees to keep your company alive, usually a couple of thousands AED per year.
Finally, the fees above assume that you manage the process all by yourself, which could be very frustrating. You can use the service of a local PRO company who will manage the process for you. You may expect to add 50-100% as fee for their service.
Living fees
VAT 5%
In 2018, Dubai introduced a 5% tax on most goods and services. Some businesses include it in their prices, while some others prefer to add a tiny footnote mentioning the exclusion. There is no set rules on how prices shall be presented.
Housing fee 5%
Every month, with your DEWA bill (Dubai Electricity and Water Authority), you will pay a Municipality Fee in the amount of 5% of your yearly actual/calculated rental value.
Mailing fee
You might wonder what these two words really mean. In Dubai, non-courier type of postal service is done by Emirates Post, yet it is not a public service to its residents. In any country I have lived, postal service is ubiquitous and free of charge for things such as receiving a letter or a package at your home address. Here in Dubai, you have to pay to receive your mail. You can choose to pay by mail, but you need to first call to see if you have received some mail. Mama FC has paid 30 AED (~US$8) to receive her gift book posted by a friend using registered package.
If you have lots of pen-pals, it is possible to rent a PO box for 300 AED (~US$82) and get your mail directed there. They are basically pigeon-holes sitting in an open space, or if you definitely need to have mails sent to your home, you can opt for the premium service to receive your unlimited mails 6 days a week for 995 AED (~US$271). Yes, it sounds just like the kind of postal service you normally expect – unlimited deliveries as long as someone sends them to you.
Alcohol fee -30%
To help people look forward to the end of their Dry January, Dubai has scrapped the 30% tax on alcohol on January 1st 2023, and has also removed the fee associated with the alcohol license. Yet as we know, the lowering of indirect tax may not immediately translate to more money in consumers’ pockets.
Transportation fees
Driver’s license fee
As you will notice in Dubai, the city is large and public transportation are extremely limited. Unless you are living in DIFC, and/or can afford to move around in taxi day in day out, you will likely need to drive. You can drive with your International Driver’s license on a Tourist Visa. However, you must get a UAE driver’s license once you become a resident and have an EID. I was expecting an easy and cheap swap of driver’s license. Instead, I have paid for an eye watering 2-minute eye test for 180 AED (~US$50), followed by 870 AED (~US$235) for the issuance of the 2-year UAE driver’s license. Beware that they only accept cash or locally-issued credit card.
Salik (Toll fee)
When you are driving on the Sheikh Zayed Road, you will likely pass under the toll gates. Every time you cross the gate, which can be several if you drive along the road, you will be charged AED4 (~US$1.1) each, and the tolls are not limited to this main road only. I would encourage to set up your Avoid Toll feature on Waze or Google Maps if you don’t want to be surprised by the bill at the end of the month.
Fines
It is something that I am not used, and was not expecting. There are speed radar every 2km on most roads, and cameras are traffic intersection and most popular areas. Don’t expect the roads to be safe; I witness reckless driving all the time. Nevertheless, I recently got a 500 AED (~US$136) fine (with an extra 20 AED fee) for dropping my parents at the airport in the designated drop-off area. My mistake might have been to drop my parents where all the cars surrounded me were also stopped, and I also gave them a hug. It was less than 1 minute, and I received the fine on my phone within half an hour.
Extra fees
Typing fee
The Government has outsourced many activities to private companies. So don’t be surprised if you have to go to a Amer center who will charge you a 27 AED (~US$8) typing fee for just keying the documents in a system…
Every day, I am surprised to see my bills with a new fee that I have never heard before. It is usually reasonable in the 10 – 30 AED range (~U$3-8). But for what? I have not received any service.
Corporate tax 9%
In June 2023, the UAE will impose a 9% Corporate tax on businesses making over 375,000 AED profits (~US$100K). It will likely have a repercussion on the price of goods and services to all residents.
No Personal income is definitely a boost for FIRE
It is true that Dubai doesn’t tax personal income, interest, coupons, dividend or capital gains. It does make it very attractive to build wealth during the accumulation phase in a FIRE plan.
However, Dubai levies many fees or taxes on services which are usually free in most other countries. Dubai still makes sense in the Accumulation phase when personal income tax is a huge drag on the growth of your wealth. However, on a Distribution phase, the advantage of no personal income tax has less importance, and the high cost of living counter balance the tax effect.
What has been your experience in Dubai? Which challenges have you face in Dubai? Stay focus, stay positive, and Happy Fire Cracking!
Original image by Perlinator from Pixabay
Thx!