UAE tax environment most favourable for expats

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A recent study by Mercer found The United Arab Emirates to be the world’s most benign tax environment followed by Russia and Hong Kong.

For single managers the UEA ranks highly as it does not assess any income tax (with only 5 percent contribution for social security) on employees gross salary.  This data also shows that, in general, married employees are better off than single employees.  Married employees with two often fare the best.

Russia comes in second (with a flat 13 percent across all income levels) and Hong Kong third (14.2 percent of an employees base salary).  The majority of European countries come in at the bottom of the list, with single managers in Hungry taking number 30 paying 48.5 percent, Denmark number 31 paying 48.6 percent and Belgium last paying 50.5 percent of their gross income in taxes and social security contributions.  The US ranks just in the middle at 29.4 percent.
Multinational companies use this 'Worldwide Individual Tax Comparator Report' to structure payment packages for their expatriate and local market employees. The report analysed the tax and benefit systems of 32 countries, focusing on personal tax structures, average salaries, and marital status.

Implications for multinationals

According to Brain Waite, a senior consultant specialising in national issues, “local taxation is one of several factors multinationals take account of when deploying staff across the globe.  It has an obvious impact on take-home pay, and in some countries with low or zero tax rates it is an important incentive for employees to work abroad.”  

Markus Wiesner, Mercer’s head of operations in Dubai says the UAR zero taxation is a strong draw for expatriates on short-term assignments and may explain why there is a good mix of expatriate talent in Dubai.  He says these young professionals can “fast track their savings” and be able to save up for a mortgage or early retirement back home.  

Waite suggests that in, “high tax destinations, multinationals need to create compensation packages that will at least match their expatriates' purchasing power in their home country.”

3 March 2008

[Mariah McKenna]

[Copyright Expatica 2008]

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