The UAE’s plans to allow expats who have fled after the outbreak of the Iran conflict to spend more time abroad without losing their tax status is not the panacea it may seem, says the head of private wealth and tax at law firm Mishcon de Reya.
Authorities in the United Arab Emirates have hinted they will show leniency on rules that require expats to be present in the UAE for a minimum number of days each year to qualify as tax residents for people who left the Gulf state since the start of the war, in a bid to incentivise residents to return, the FT reports.
However, Mishcon de Reya’s Charlie Sosna says this will not eliminate the underlying tax risk.
“Even if the UAE continues to treat an individual as tax resident despite extended absences, other jurisdictions may take a different view if that person is spending significant time there or has established sufficient ties,” he said.
Sosna warns this will create uncertainty, with individuals potentially treated as resident in more than one country, or challenged on where they are genuinely based.
“Those returning to the UK in light of the current situation should be aware they may trigger a UK capital gains tax liability on gains made while in Dubai, as well as an income tax charge on certain forms of income received during that time, both of which they may have assumed would fall outside the UK tax net.
“The key point is that the UAE’s changes alone will not protect against scrutiny elsewhere, so anyone in this position should seek advice before assuming their status is secure.”
