Moving from UK to Dubai - Remote working visa and tax residency - Other options?

[azlikesdubai]

Hi, apologies in advance if this has been posted before.

Former UK based sole trader, with a contract with a UK based company. I left the UK on March 30 and have been travelling around Europe for now, with the aim of becoming UK tax non-resident (less than 16 days in UK per SRT). I'm mid way through my application for the Dubai Virtual Working Programme, and I have a few questions:

• From what I've read so far, I would need to spend 183 days in Dubai to become tax resident, and obtain a tax residency certificate, is this correct? Is there another way to obtain the certificate without needing to spend so much time in Dubai?
• In the case that I am able to obtain the tax residency certificate, do I only need to visit once every 6 months to renew it? Or is it 183 days per tax year?
• Is the Dubai Virtual Working Programme visa limited to Dubai only? Or could I live in a cheaper Emirate?
• How does the Virtual Working Programme approach compare to setting up a company in the Freezone? What are the pros/cons
• Is there any other country that has 0 or very low tax, where I can obtain tax residency, without needing to spend 183 days per year, and not needing to rent a place out for a year (Cyprus, may as well pay tax if I'm forced to rent a place I don't want to stay in)

My goal is to travel for a month or so in each country, I would prefer not to be stuck somewhere for 183 days.

 

[CaptK]

Unfortunately to become tax residents you will need to show that your centre of life is in the UAE. You will need to spend the majority of the 6 months in the UAE, pay utilities and have day to day transactions.

Of course you can leave the country to "work" so I would suggest an FZ rather than a virtual worker.

Once you have the certificate you only need to spend one day in the UAE every 180 days. So long as your visa is valid so will your certificate.

 

[khinkali]

@azlikesdubai what would you use a tax residence certificate for?

 

[Marzio]

Once you have the certificate you only need to spend one day in the UAE every 180 days

Are you saying that to get the tax residency certificate you have to spend the first six months in UAE and then when you get the certificate you are free to move around and return to UAE every 180 days to keep it active?

 

[CaptK]

Are you saying that to get the tax residency certificate you have to spend the first six months in UAE and then when you get the certificate you are free to move around and return to UAE every 180 days to keep it active?

Yes, ideally spend as long as possible in country or go often. At least every other month for a few days and be paying utilities.

Speaking from personal experience.

 

[zzzzzz]

Unfortunately to become tax residents you will need to show that your centre of life is in the UAE. You will need to spend the majority of the 6 months in the UAE, pay utilities and have day to day transactions.

Of course you can leave the country to "work" so I would suggest an FZ rather than a virtual worker.

Once you have the certificate you only need to spend one day in the UAE every 180 days. So long as your visa is valid so will your certificate.

Why is it so important to be there for the first six months in the first year, and get tax residency certificate? Isn't certificate annual document?

 

[CaptK]

You will need to prove your day to day living is in Dubai, via debit card transactions.

Why is it so important to be there for the first six months in the first year, and get tax residency certificate? Isn't certificate annual document?

 

[MarkusM]

You will need to prove your day to day living is in Dubai, via debit card transactions

And what about the report from the inspectorate of immigration? I saw this is a criteria for obtaining the tax certificate..

 

[zzzzzz]

You will need to prove your day to day living is in Dubai, via debit card transactions.

You mean as a proper way of exiting tax system in your home country and becoming tax non-resident there?

 

[CaptK]

And what about the report from the inspectorate of immigration? I saw this is a criteria for obtaining the tax certificate..

This is what is required, the last 2 are crucial, hence you need to be in country.
The report from Foreign Affairs just details the amount of time spent within a year in Dubai, Bank statements show where you are spending your money and if they don't see majority UAE transactions you wont get the certificate.

A copy of Passport and Emirates ID
Valid residence permit
A certified copy of the (residential) lease agreement / Tenancy contract
Salary certificate / Income certificate
A report from the General Directorate of Residency and Foreigners Affairs mentioning the duration of the person’s stay in UAE (Minimum 180 days)
Bank statement for 6 months

 

[azlikesdubai]

@khinkali I've been advised to seek tax residency somewhere, I think technically it's not required to leave tax residency in the UK (only SRT), but many people are telling me that upon returning to the UK, if I don't show tax residency elsewhere, HMRC could decide to tax me. I plan on being out of the UK for 5 years+, as it seems like HMRC frown upon those who become tax non resident for a short period of time (though I can't find anything concrete here).

@CaptK I think the Virtual Working Programme is cheaper than setting up a company in the freezone? And with both options I would need to spend 6 months in Dubai anyway?

Could someone please walk me through the rough plan? I think I need to complete the visa program/FZ company (if its a better option), get a 1 year visa/residency, open a Dubai bank account, rent somewhere out for 6-7 months and live there (apply in the 7th month so I have the preceding 6 months bank statements?), apply for the Tax residency certificate, and then I'm free to travel elsewhere for the next few years (SEA etc.) as long as I return to Dubai for a week or so every few months?

Does the tax certificate need to be refreshed somehow? How exactly does it work, could they strip me of it even if I visit for a week every 6 months?

Many thanks

 

[khinkali]

@khinkali I've been advised to seek tax residency somewhere, I think technically it's not required to leave tax residency in the UK (only SRT), but many people are telling me that upon returning to the UK, if I don't show tax residency elsewhere, HMRC could decide to tax me. I plan on being out of the UK for 5 years+, as it seems like HMRC frown upon those who become tax non resident for a short period of time (though I can't find anything concrete here).

I expect a tax residency certificate can help prove you met the conditions of the SRT, but having one doesn't prove or disprove non tax residence. The five years thing is called "temporary non residence" and is for capital gains that you held before becoming non resident, which are in UK tax scope if you become tax resident again within five years (so if there is a risk of return and the value is likely to increase, you presumably want a tax event at the time of leaving).
https://www.gov.uk/government/publi...rary-non-residents-and-capital-gains-tax-2021
The reason I asked is that someone said a broker asked for a TRC but it's the only mention I've ever seen here of needing one other than satisfying a country that requires it for tax non residence. As you're planning to move around, ability to get a TRC could help if one of your vacation destinations wants to tax you?

 

[zzzzzz]

Tax residency certificate is just one of many documents to prove your tax status. I know flight attendant from EU, employed at Emirates in UAE. She is not technically present 180 days per year in UAE (lots of global flights) and Emirates pays for her accomodation in UAE. Is she tax resident in UAE? No ejari, no dewa, no sewa, no 180 days in UAE....but her home country would say she IS tax non-resident!

 

[khinkali]

her home country would say she IS tax non-resident!

Yes it's really important to remember that countries have very different treatment of people leaving their tax system. Some are quite clear, others can be quite indeterminate. UK switched to a slightly complex but much clearer residence test; before that there were court cases involving the location of golf clubs and scuba gear.

Then there is the "arriving" issue. @azlikesdubai plans to spend "a month or so in each country", which in practice should be fine but the theoretical tax situation is weird. How many days can you spend in country X before either you, or your employer (assuming you have a nice UAE or Carribbean or Delaware company) are in country X's tax scope..?

 

[zzzzzz]

Yes it's really important to remember that countries have very different treatment of people leaving their tax system. Some are quite clear, others can be quite indeterminate. UK switched to a slightly complex but much clearer residence test; before that there were court cases involving the location of golf clubs and scuba gear.

Then there is the "arriving" issue. @azlikesdubai plans to spend "a month or so in each country", which in practice should be fine but the theoretical tax situation is weird. How many days can you spend in country X before either you, or your employer (assuming you have a nice UAE or Carribbean or Delaware company) are in country X's tax scope..?

In her case the most important facts for taxman are:
1. No social ties (partner or kids not in home country)
2. No economic ties (no bank accounts, no company, no job, no car, no health insurance, no permanent address, no apartment - unless rented out... in home country)
3. Not 183 days per year in home country
4. She has to stay abroad for 5 years or more

 

[azlikesdubai]

@khinkali
I've been advised repeatedly that being a tax resident of nowhere is a rather precarious position to be in, although being from the UK, seems to be pretty easy to do, as becoming UK tax non-resident only requires following the SRT, and the British passport gives plenty of options in terms of countries to visit without applying for a visa beforehand.
I would guess there are many digital nomads that have become UK tax non resident, and don't become tax resident elsewhere, but officially I think this seems to be a grey area, or am I worrying for no reason?
I spoke to HMRC about losing tax residence, they didn't want any confirmation of registering tax residence elsewhere, in fact I've been getting conflicting advice from them on whether or not I even need to fill in a p85 (sole trader now so no PAYE reference which the form keeps asking me for). They even mentioned that I could continue to use and be paid into my UK bank account even whilst tax non-resident, do you think that's a good idea?

 

[khinkali]

I've been advised repeatedly that being a tax resident of nowhere is a rather precarious position to be in, although being from the UK, seems to be pretty easy to do, as becoming UK tax non-resident only requires following the SRT, and the British passport gives plenty of options in terms of countries to visit without applying for a visa beforehand.
I would guess there are many digital nomads that have become UK tax non resident, and don't become tax resident elsewhere, but officially I think this seems to be a grey area, or am I worrying for no reason?

There are three different things here, leaving, arriving and living.

Leaving the UK for tax purposes is a matter of fact according to SRT. You follow the diagrams and are careful about the definitions of "home", "family", "available accommodation", etc. Maybe a TRC could help with evidence, but as you mentioned it's not a requirement.

Arriving is probably more complicated. How many days can you spend in country X before being tax resident? But how many before you have local taxes to pay as a non resident? Or when does your company have a Permanent Establishment if you manage it, or work for it. You said about a month and I'm not aware of people being caught out in that timescale (somebody please feel welcome to correct me, as many of us have this question), even if the written law in many places could put you or your company in the tax nexus quite rapidly.

Living is another matter. It's getting harder to have a bank account, broker account, even crypto exchange account if you don't have a "place". Typically legal residence is enough, with bank account, utility bill, whatever. That's why Fred is so popular here. It's a bit different for me because things like utility bills are very hard to get as a tenant in Georgia, but I can get a bank statement and reference easier than in most countries (though it is quite enlightening to find out what your bank records really say about you....).

I spoke to HMRC about losing tax residence, they didn't want any confirmation of registering tax residence elsewhere, in fact I've been getting conflicting advice from them on whether or not I even need to fill in a p85 (sole trader now so no PAYE reference which the form keeps asking me for).

HMRC's web site says that you should fill in P85. Is that a requirement to become tax non resident, or just something you need to do to collect a tax refund? I think the latter but some people have suggested otherwise. Similarly you must give the DVLA your new UK address when you move home, but when (if ever) does your license become invalid after you move abroad? (if anyone really knows, please comment - DVLA employees don't seem to know)

They even mentioned that I could continue to use and be paid into my UK bank account even whilst tax non-resident, do you think that's a good idea?

That is a great question that deserves its own thread (but it's probably very country specific). I think that I and many, many people might be breaking the Ts & Cs of our bank, by continuing to use a UK bank account while living abroad. I don't know many UK expats who don't. I'm not aware of any HMRC issue, but I'd be keen to hear from people who had a problem.

 

[azlikesdubai]

@khinkali From what I've been told so far by HMRC, it is not a requirement to fill in a p85 to lose tax residence, though this might be the case if you are on PAYE. The last advice I was given was to fill in my final UK self assessment with a paper form and put a note mentioning that it is my final self assessment for the UK and I will be tax non-resident in the following tax year. Though I plan on calling again in the next few weeks to try and reach a technical specialist again who can hopefully give me some advice to clear up the conflicting advice I was previously given by the regular self assessment folk.

If one has a UK bank account, becomes UK tax non-resident, and continuously jumps from country to country every month, is it even necessary to become tax resident somewhere at all? Multiple people have told me it is, but I cannot find anything concrete. I think the Dubai Tax Residence Certificate would only help if any other country happens to ask, and perhaps when returning to the UK, if HMRC ask where I've been tax resident in the years I was abroad. But at the same I think HMRC would only care if I was non resident by SRT.

Are there any other digital nomads, from the UK, on this forum who constantly travel between countries? What are they doing?

 

[khinkali]

If one has a UK bank account, becomes UK tax non-resident, and continuously jumps from country to country every month, is it even necessary to become tax resident somewhere at all?

The SRT is in primary legislation so HMRC don't tax you for having a UK bank account, nor for not being tax resident somewhere else. It's necessary to do things such as close your bank account and establish tax residence elsewhere to leave some EU countries and as far as I can tell that is where the misinformation comes from to do with leaving UK.

After how many days in some country are you in the scope of their taxes due to working there? Or after how many days is a company that you manage or work for in the scope of their taxes? That is not always clearly defined. You mentioned a month and in practice I don't think many people get taxed in some country for answering work emails while there on a four week vacation - that would be hard to enforce and be detrimental to tourism. If you perform a more obviously local function (playing music at a concert, speaking at a conference, etc.) then even one day of work could get you a tax bill. Last time I checked you needed a specific visa to get your flights and hotel refunded tax free if you speak at a conference in the USA, though I doubt many people would declare the taxes in practice.

The issue that a lot of people have, is access to services such as banks and brokers. It is not easy to get a bank account as a nomad (here in Georgia seems to be the main exception currently), but if your needs are simple then your UK account is likely to be OK. Almost all UK expats I know use some friend or family address to keep their bank account, whether that's strictly permitted by the bank or not. Some simple things such as Netflix, Spotify, Amazon Prime, Betfair, etc. don't work in all countries so it is handy to keep a first world account.

If you don't need the TRC then the Dubai option is easy (though not cheap). Drop $10k on a company to get legal residence, a bit of fake local business substance and as legit local bank account. Just one day needed in UAE per 180 days. Or Georgia is even easier for now, if your finances are genuinely clean you can get a tax id, real bank statements and proper reference even without tax residency or legal residency.