Making the most of your time offshore and planning for the future is vital. But if you've been living a tax-free life in the UAE, with generous allowances for school fees, housing and private health care, you might be in for a shock when you realise these are out of reach when you return home, write Acuma Wealth Management's Craig Holding and James Thomas.
1 Factor in the cost of living outside the UAE
Don't make any assumptions about costs. If you've been overseas for a few years, you may be out of the loop. Find out what everything costs, from buying groceries, to house prices and the "luxuries" we take for granted in the UAE, such as salon visits and golf club memberships. Evaluate these costs against your earning potential from your new job or earnings from your savings and investments. You may find you cannot afford private schools or health care in your home country.
2 Weigh up the difference in exchange rates
With some exchange rates so high, many people are looking at keeping and growing their money offshore and then returning it to, for instance, Australia if/when the Australian dollar returns to lower levels. British expats are generally less concerned about exchange rates, but it's still something to consider.
3 Get up-to-date tax information
One client of ours is going home to a good salary, but after tax he will be able to save only 30 per cent of what he is currently saving in Dubai. Regardless of the numbers involved, that is a massive difference. Luckily, he has made substantial savings while in Dubai and will be in a good position when he returns home. In the UK, your earnings are taxed at source at up to 45 per cent, there are National Insurance contributions to pay, most items that you purchase will have Value Added Tax applied at 20 per cent and there are various other taxes and duties to consider. In Australia, your earnings are also taxed at up to 45 per cent, while there are Medicare levies and a Goods and Services Tax of 10 per cent. In return for these taxes, you will be entitled to benefits such as education and health care, but you need to factor these things into any calculations if you are considering returning home.
4 Explore offshore solutions for your UAE savings
If you have accumulated funds while in the UAE, there are a number of offshore options available that you can consider. If you become a tax resident of Australia and still have this account, you are able to keep up to A$250,000 (Dh936,416) in foreign currency per person without any issues. You will pay tax on the interest as if it was back in Australia, but at least it is earning despite tax. There is no cap on the amount that you can hold in a foreign currency.
5 Consider buying a property
If you have cash or assets in Australia, now is a good time to be buying overseas assets with these funds. Property in the UK is yielding about 5 per cent and mortgage costs are low, so if you have sufficient funds, a property in London could be a worthwhile opportunity. When you return home, this property is treated as if it is in Australia, which is taxed as income, but you achieve tax credits as well if the property is costing you money. From a UK point of view, buying property for investment is a good long-term proposition and while the rental income is potentially taxable, there are ways to offset this to make it as efficient as possible.
6 Start saving and planning for retirement well before you leave the UAE
While you are offshore, you should be trying to save 10 per cent of your salary as a minimum to make sure you have something to show for your time overseas. You can put this back into superannuation or a pension plan if you wish, but the growth will be taxed. In Australia, for example, it is 15 per cent.
7 Find out if you are eligible for health care and other benefits
Don't simply assume that as a citizen of the UK, Australia or other country that you will be entitled to the same benefits as everyone else the minute you land. You may have to file paperwork or fulfil a few months of residency requirements to be eligible for free National Health Service treatment in the UK, or it might take months of being on a waiting list to enrol your child in school. If you haven't been paying into pension schemes in the UK or paying National Insurance contributions from overseas, you may not have any pension entitlement.
8 Include your family in your plans
Your spouse's domicile and residency might be of a different status to yours if they spend different amounts of time at home. Does your spouse have a separate pension plan? Will your spouse's savings be subject to the same taxes as you? Are there different tax categories for married couples at home? These factors must be explored in detail before leaving the UAE.
9 Be realistic about the lifestyle you are aiming for at home
Income taxes mean much lower disposable income. High property prices will affect your choice of accommodation. Domestic help will be significantly more expensive at home and may affect whether you can afford to go back to work or have to stay at home to take care of your children. You don't want to end up going home and blowing all your tax-free savings on living an unrealistic lifestyle.
pf@thenational.ae
