Banking, Money and Taxes in Dubai

Expats will find that banking in Dubai is a relatively simple, straight-forward experience. In fact, managing your money in the Emirate is a pleasure to many, given their tax-free income status. That said, however, it's crucial to avoid living off credit and incurring debt.

Banking and money in Dubai

Opening a bank account in Dubai is a fairly painless process once you have your residence visa in hand. Many well-known international banks have a presence here, so finding a familiar brand is easy and convenient. That said, expats shouldn't discount local UAE banks; they provide excellent service, and the nature of the small, competitive market means favourable deals are easy to find.

Another reason to do your homework is that fees and service offerings differ quite considerably between the various banks, although the Central Bank is reviewing bank fees in an attempt to standardise these. Current accounts, debit and credit cards, savings accounts and car loans are standard fare, with some banks also offering preferential banking depending on your salary level. For Muslim expatriates and locals, all UAE banks offer Sharia-based accounts in accordance with Islamic laws and banking principles. These accounts earn no interest, and have somewhat complicated arrangements for mortgages and loans.

Cheques are widely accepted in the UAE. Expats can issue a cheque for pretty much anything, but beware if you bounce one, as the aggrieved party can insist you go to jail until your debt has been settled. Post-dated cheques are popular, and are the primary method used for buying a car and paying annual rent, as debit orders are not common in Dubai.

Banks are generally open every day except Friday, from 8am until 3pm. Most have Cheque & Cash Deposit machines available 24 hours a day, seven days a week. Internet banking facilities are also available, though in some cases, they can be rather unsophisticated.

One aspect of banking in Dubai that expats may find frustrating is the fact that many transactions can only be done at the branch, in person: so make sure you choose a bank with branches convenient to your lifestyle. High fees for doing electronic transfers mean most people stick to cheques, cash and credit cards for making payments to a third party.

Credit

When buying property it is possible to get a loan from the bank, but be careful when buying off-plan. Several proposed developments were started in Dubai's heyday and never finished; in this case, you are obligated to make progress payments and fight it out later.

Credit cards normally attract high interest charges. People do run into trouble living beyond their means, so it’s important to remain disciplined.

Currency

ATMs are numerous, and there is no charge for drawing cash from a different bank’s machine. The maximum daily limit for withdrawals is around 8,000 AED, which is a big chunk of change. The dirham, also written as Dhs or AED, is the local currency and pegged to the dollar, at a rate of 3.673 (officially), although this will vary depending on where you are. The notes in use are: one thousand, five hundred, two hundred, one hundred, fifty, twenty, ten and five. The coins or cents are called fils, and come in a one dirham, a fifty and a quarter. Most shops round up or down as there are no smaller coins. Anything larger than a 100 dirham note will cause consternation, and you may battle to get change for it, especially in a taxi.

Outward Remittances

As the population in Dubai is predominantly expatriate, some banks offer one free transfer a month for sending money home. This doesn’t apply to every country, so double-check before making the transaction as the fees charged for making outward remittances can be quite high.

Western Union and similar companies have ample outlets around the city, and are popular alternatives for these transfers, especially when recipients don’t have bank accounts themselves. The big international banks, like HSBC and Barclays, will also offer you the option of opening an offshore bank account in somewhere like Jersey or the Channel Islands. This is a good way to save your extra cash outside of the country, and an important back-up in the unfortunate event of death.

Taxation, wills and Sharia Law

There is no personal income tax, GST or VAT charged in the UAE. Taxes are added to alcohol when purchased from an outlet, and to meals in licensed (liquor-serving) restaurants. Some items attract import duty at Dubai Customs.

Certain countries will tax earnings by their citizens no matter where it is earned, for example the United States, while others will insist that you are out of the country for a minimum period of time before you become exempted. It’s therefore advisable to get advice from a taxation expert in your home country. People will tell you that there is “hidden” taxation in the UAE, as you have to pay a fee for anything, including renewing your visa every three years. But in most cases your company picks up the tab for this, so in reality, it still works out to be considerably less than the income tax you were paying before.

Wills

It’s important to know that your “home” will is not valid for anything you own in the UAE. If an expat UAE resident dies, their UAE bank accounts are immediately frozen until the estate is finalised and their debts are paid in full. This includes any joint accounts. Accounts held in another country are not affected. It is therefore imperative that the spouse has a separate bank account in their own name containing emergency funding for this eventuality. If there is no Sharia-compliant will in place at the time of death then UAE law is applied, and your estate will be divided up by the court.

If you own property or other assets in Dubai you should endeavour to have a will drawn up in the UAE to make sure your family is properly taken care of. There are several specialist firms in the region that can advise you on this. Incidentally there is no estate or inheritance tax applied in Dubai.