Is the UAE No Longer Tax Free?

The United Arab Emirates, known across the world for their booming, tax-free economy, may undergo a change.

Taxing Remittance

The government is now considering taxing remittance sent back by the numerous expatriate workers, according to a number of bankers examining this plan. The nation is home to citizens from across the globe and expats make up around 80% of the population.

The Ministry of Finance plans has sent out information to a number of financial institutions to decide whether this is a feasible option. They will hold meetings with banks around the nation to discuss the potential tax-rate along with other details of this strategy.

In 2012, expat workers collectively sent home approximately AED 45 billion which is an increase of almost AED 4 billion from the year before. This has raised concerns in the government that too much of the nation’s wealth is being sent overseas.

Debt Crisis 2008

Additionally, the debt crisis that transpired in 2008 has caused a heightened awareness of the state of the UAE economy. Many members of the government are focused on taking preventative measures rather than seeing a recurrence of an economic crash. As a main factor of the crisis was heavy reliance on oil exports, efforts are now placed on other sectors.

Many expats in Dubai lost large amounts of money during this time.

However there are many skeptics on whether this new taxation will come to fruition or not. Simon Williams, chief Middle East economist at HSBC explained, “Implementation would be extraordinarily difficult, and would likely offer only very limited returns.” He continued that it would be unlikely that any solid policy emerges from these initial discussions.

Another commercial banker noted that many flock to the UAE for it’s no tax environment and if that changes, then the attractiveness of living in the country will fall. He explained, “Remittances are key for expats in the UAE. A lot of them come here to support families back home. So we expect any such levies to be nominal, if they are imposed at all.”

Expats from Asia

Many of the expat workers are from south and Southeast Asia who have come here to provide for their families by taking low-paying or strenuous jobs such as construction work. Many believe that if the tax does come in to play that these are the people who will feel it the most.

According to the World Bank, India, China and the Philippines are the biggest recipients of remittances this year and the amount they receive is expected to continue growing.

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