Becoming a Resident in Dubai: Financial and Fiscal Consequences
What happens if you choose to become a resident in Dubai without living there? For example, if you still spend a lot of time in the Netherlands? If you purchase real estate in Dubai, you often get the option to also become a resident in the United Arab Emirates. In this blog we explore the tax and financial implications of becoming a resident in Dubai while living elsewhere. We focus on real estate investments in this vibrant city.
Residence Status
It is good to make a distinction in advance between four residency statuses:
- I am more than 183 days per year in the Netherlands and no resident in Dubai
- I am less than 183 days per year in the Netherlands and no resident in Dubai
- I am more than 183 days per year in the Netherlands and resident in Dubai
- I am less than 183 days per year in the Netherlands and resident in Dubai
Based on your residency status, we list below the financial and tax consequences of whether or not you are a resident in Dubai!
1. I am more than 183 days per year in the Netherlands and no resident in Dubai
If you stay in the Netherlands more than 183 days per year, you remain a tax resident of the Netherlands. This means that you are taxable on your worldwide income according to Dutch tax laws. Having a residency status in Dubai will then have no influence on your Dutch tax obligations.
1. A. Taxfree Real Estate & Rental Income
Looking at real estate, everyone's burning question is: do I have to pay tax on ownership and rental income from real estate in Dubai? The answer is simple: no. This is independent of how long you spend in which country and whether or not you live in Dubai. You do not pay tax on owning real estate or the rental income from it. To know more about how this works in the Netherlands and Box 3 in your tax return, see here .
1.B. Mortgage Options
If you continue to live in the Netherlands, you can borrow 50% of the market value of a home in Dubai. If you live in the UAE and have income here, you can borrow up to 80% of the market value. You do not have to be a UAE resident to take out a loan in Dubai. Learn here more about financing in Dubai and Payment Plans.
2. I am less than 183 days per year in the Netherlands and no resident in Dubai
If you choose not to take advantage of the benefits of being a resident in Dubai, the same benefits as described above apply to people who are in the Netherlands more than 183 days a year and are not a resident in Dubai.
3. I am more than 183 days per year in the Netherlands and resident in Dubai
In this situation, you remain a tax resident of the Netherlands if you stay in the Netherlands more than 183 days per year. At the same time, you can choose to become a resident in Dubai. If you purchase property in Dubai and qualify for residency, we strongly recommend that you become a resident in Dubai. This offers several advantages. In addition, you benefit from the tax benefits described under point 1.A.
3.A. Opening a Bank Account
As a resident in Dubai, it is considerably easier to open a bank account. You get access to a wide range of banks and financial institutions. These often offer more favourable conditions and services for local residents. This can be especially useful for managing rental income from your real estate and other financial transactions.
3.B. Living as Resident in Dubai
With a visa for Dubai you have the freedom to stay in Dubai indefinitely, as long as your visa is valid.By having residence in both the Netherlands and Dubai, you can make optimal use of the advantages of both locations. While the Netherlands remains your tax home base, Dubai offers you opportunities for financial growth, investments and a unique lifestyle.
3.C. Better Mortgage Options
As a resident in Dubai you have significantly more favourable conditions when borrowing for real estate investments. As a resident, you can borrow up to approximately 80% of the market value of a property, while this percentage for non-residents is usually around 50%. Likewise, you get access to local mortgage options, which often offer better terms than those available to non-residents. These more favourable conditions can result in significant savings. They also make it easier to finance your investments at attractive interest rates.
However, to qualify for a higher mortgage as a resident, it is necessary to demonstrate assets in the UAE. This capital can, for example, consist of rental income or other local financial resources.
4. I am less than 183 days per year in the Netherlands and resident in Dubai
If you stay in the Netherlands less than 183 days per year, you can become a tax resident of Dubai, provided you meet the local requirements. Better known as emigrating to the United Arab Emirates and therefore deregistering as a resident in the Netherlands. This can provide significant benefits, including the opportunity to take advantage of Dubai's tax-free status. In addition to the above Tax-Free Real Estate & Rental Income, we list some other benefits below. The benefits 1.A., 3.A., 3.B and 3.C also apply to you. as described above.
4.A. Work Income
Dubai is known for its tax-free status on personal income. This offers significant advantages for entrepreneurs who want to structure their income through Dubai. By strategically routing your income through Dubai, you can minimize your tax burden, which is especially beneficial for people who spend a lot of time abroad. Please note, you need to set up a company in Dubai for this, we can help you with this too!
4.B. Corporate Tax
Unfortunately, Dubai is no longer completely tax-free. Should you choose to set up a business in Dubai, a rate of 9% applies on taxable income above AED 375,000 during the relevant tax period. A 0% rate will apply to taxable income that does not exceed AED 375,000 during the same tax period. Regardless of the number of companies or business activities in which the taxpayer is engaged during that period. This does not always mean a great tax environment when you compare it to other countries. Where these tax percentages are many times higher. In Dubai you can therefore retain more of your profits and reinvest them in your business or other projects.
4.C. Insurances
When deregistering from the Netherlands and registering in the UAE, you must also arrange your insurance in Dubai. Dubai lacks the extensive social safety nets such as sickness benefits and disability schemes that we have in the Netherlands. This means that you are responsible for taking out insurance that covers these risks. In many cases, employers in the UAE can offer these insurances as part of their benefits package. For good health insurance with international coverage, you should take into account an annual cost of approximately €3,000 to €5,000 per person.
4.D. Retirement Pension
If you decide to work abroad, for example by emigrating to Dubai, you are no longer insured under the General Old Age Pensions Act (AOW) in the Netherlands. For every year that you are not insured, your AOW benefit is reduced by 2%. Although it is possible to take out voluntary insurance in the Netherlands to avoid this discount, the premiums are often so high that it is not financially profitable. It is therefore important to consider how you will build your pension and what alternatives you have available in the UAE.
4.E. Child Benefit & School Fees
When you no longer live in the Netherlands, your right to child benefit lapses. In addition, it is important to know that education in Dubai, unlike in the Netherlands, is not free. You have to take significant costs into account for the education of your children in international or private schools. On average, you can expect school fees to be around €1,000 per child per month.
Things to take into account
When considering applying for a visa and residency in Dubai, there are some important things to keep in mind. First of all, the process is not free. You must travel to Dubai at least once to undergo the required medical tests. Furthermore, if your visa is based on property ownership, you cannot use this visa to work in Dubai. A separate work visa is required for work.
In addition, there are specific rules regarding bank accounts: if you open an account to receive rental income, this account may not be used for other business activities. This means you may need to manage multiple accounts for different purposes.
It is also important to know that, regardless of whether you become a resident in Dubai, you remain liable to pay taxes in the Netherlands on the real estate you own there. This includes not only regular taxation, but also taxes on pension and AOW. It is therefore essential to stay well informed about your tax obligations and financial planning both in the Netherlands and in Dubai.
To be or not to be a Resident in Dubai
In short, becoming a resident in Dubai can offer attractive tax benefits. In addition, it also requires a thorough understanding of the financial implications and obligations, both in Dubai and in the Netherlands. It is advisable to apply for your residency as soon as you are eligible, given the many advantages and minimal disadvantages associated with it.
For more information on how and the conditions for obtaining residency in Dubai, please refer to our Residency page. We are happy to help you with your visa application!
Article references: Belastingdienst | Mof Gov | Rijksoverheid |
The data in this blog is made available and is intended to provide general information. No rights can be derived from this blog. No one is liable for the consequences of the use, in any way, of the information provided in this presentation.
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