Banking

Dubai is projected as a tax free heaven, especially to expats that hail from countries with high tax rates. People, coming to Dubai, thought that can earn and save a lot so that they may retire peacefully after working some years in Dubai.

The reality is quite different. Dubai is not all glitter and there certainly is no free lunch. While there is no direct tax on the incomes earned in Dubai, there are number of indirect taxes, hidden charges and fees that result in very high cost of living and making it quite tough to survive in Dubai.

When you first arrive, there’s the cost of your medical, visa and work permit, for which your employer may or may not stump up (if you’re a trailing spouse, likely not). Then there’s your Emirates ID card, optional e-gate card, driving license, and, if your company doesn’t provide it, health insurance or government health card.

If you buy a car, there’s AED 385 to register it every year, the cost of a SALIK tag so you can drive on the main roads, and AED 4 every time you pass a SALIK gate.

With monthly rent payments still rarer than a rainy day, you may have to pay a significant chunk of rent upfront before you get the keys to your new home. And that’s before you consider the deposits you have to leave with utility companies just to get connected (AED 2,000 for water and electricity in Dubai – up to AED 4,500 in Sharjah); the high cost of water and electricity (it’s not unusual for a five-bedroom villa in an expat area to see monthly bills of AED 5,000); housing fees (five per cent of your annual rent); a home maintenance contract to keep air-conditioning running smoothly; the cost of an internet connection (AED 449 per month for 8MB broadband) and monthly landline and television connection fees.

If you have children, you can kiss goodbye to AED 30,000 to 80,000 per child per year (ranging from Indian to British-curriculum schools). As for health, a standard appointment with a GP in local clinic costs AED 200 a pop.

And now about the hidden costs of living in Dubai ….

Majorie van Leijen, in Emirates 24×7, has recorded real life examples of how such hidden costs of living are hurting expat life in Dubai.

Hidden costs of housing and renting out property in Dubai: A young Syrian who recently moved to Dubai started off in a shared living accommodation, where his payments included only the monthly rent and a fair share of the Dewa bill. Although this was convenient, he decided he wanted to have a place of his own, so he opted for a one-bedroom apartment.

“I estimated my budget and set my limits. I was able to afford an apartment for no more than Dh50,000 a year. It was not very hard to find. However, when I was ready to move, I realised I would need at least another three months to come up with the sum of money the first payment required – Dh12,800!”

Khaled’s one-bedroom apartment is rented for Dh48,000 per year, to be paid in six installments; Dh8,000 for the first payment. On top of that comes a five per cent deposit fee (Dh2,400) and a five per cent commission fee (Dh2,400) as the contract was mediated by a broker. He did not need to pay for service charges, nor for chiller charges, which are often billed separately by the developer. However, his Dewa bill includes a housing fee (five per cent of the total rent) and a sewerage fee, in addition to electricity and water consumption. On top of that, an internet, TV and phone connection will usually cost around Dh300-500.

Hidden bank charges and service fees: Banks and their fees are a big source of frustration for many UAE residents. Credit cards, although offered free-of-charge, are one of the main money-suckers and usually provide a charge-free period only. After that, there is a maintenance fee, late payment fee, over-limit fee, and standard annual fee. For loans, the list is even longer: there can be a processing fee, late payment fee, re-scheduling fee or property valuation fee. In case of insufficient funds on any account the bank can charge you a standing order fee. Furthermore, many banks throw fees for any kind of service: a new cheque book, card replacement, loan clearance clarification or any other statement required.

Mashreq Bank customers had to approach to the Central Bank to complaint about the exorbitant rates the bank was charging to them.

Hidden driving license charges:: A British expat in Dubai narrates how he paid Dh 8,500 for his driving license. “When I registered for a VIP driving course, I was told that I would pay Dh6,000 in installments, a deal for which I was willing to accept. I was never told that I needed to pay an extra Dh360 for the actual licence, and half-way through the course the highway exam was introduced, which required Dh400. Although some people were exempted from this fee because they registered before it was imposed, I was told that I had to pay for it.”

There are no standard rules for most of the transactions happening in Dubai. If there are rules, they are subject to abrupt changes, and updates are imposed without consultation with the thriving expat community, that makes the larger percentage of overall UAE population.