While most expatriates plan to return home at some point, most do not have a comprehensive exit strategy.
Some may choose to leave voluntarily for family or lifestyle reasons, but others have the matter taken out of their hands because of job loss.
Job insecurity in the UAE is on the rise as oil prices fall and companies lay off workers, making it harder for residents to prepare for a return home.
Talking to three expatriates who have returned to the United States, India and the United Kingdom, here we learn the mistakes to avoid and the factors to consider when you go home, from shipping to moving your lifetime savings to a return to taxation.
How far ahead should you start planning your return home from the UAE?
If you have the luxury to do so, consider planning at least 12 to 18 months before you move back home.
This is the advice of Julian Vydelingum, a senior wealth planner at the expat consultancy Killik Offshore.
“Depending on where you are moving to, you may want to realise any capital gains that you’ve made while living and working abroad so these don’t become liable to tax in your home country,” he says. “To simplify your affairs, it can be prudent to move home at the start of your home country’s tax year – for example, after April 6 for Britons or January 1 for Americans.”
Sam Instone, the chief executive of the financial adviser AES International, agrees. “Too often, expatriates return without proper financial preparation and the consequences can be devastating. Start planning a year in advance, work out a cash flow model and look at disposal of assets and capital gains in the tax year before you repatriate.”
The British saleswoman Jackie Smith’s return to the UK after nine years in Dubai had to coincide with selling her apartment in the Greens to avoid paying UK capital gains tax upon its disposal. “It went on the market in summer 2013, when I began to think about moving home, but the market was changeable and I had bad advice on the best sale price,” says Ms Smith, who is 38.
“Ultimately, I didn’t sell until March 2014, which was a relief as it just fell into the 2013-14 tax year. Still, my tax adviser assured me I would qualify for split-year treatment, starting on my arrival in the UK of June 15 last year. I also had quite a lot of shares from my old US company to dispose of before my return. I was told I could ‘bed and breakfast’ these – sell them and buy them back just before my return to minimise capital gains tax.”
Linda Joe, a 36-year old minister from India, grew up in Abu Dhabi then lived in Dubai from 2004 to 2011. She planned her return home for several years after separating from her husband. She bought an apartment in Kochi in Kerala in 2008 with a 500,000-rupee (Dh27,500) deposit and had paid off the total 3 million rupees in instalments by summer 2010.
She set up a fixed-deposit account with the South Indian bank in Kerala, earning about 8 per cent interest, and put in 200,000 rupees. Having deposited 100 gold sovereigns in a bank locker in Kerala, she bought bangles, necklaces and about another 50 sovereigns before leaving Dubai – gold is cheaper here than in India, as there are no taxes.
How should you transfer your savings?
There are many options for sending money home, from your bank to an exchange house or an online brokerage. But which is best has long been the subject of debate.
Ultimately, it’s worth comparing rates and fees with different providers to get the best deal.
The American Amy McFarling, 41, left Dubai in 2013 with a substantial exit package from the agency where she had worked for three years, including as its chief operating officer, when it was taken over. She had been living outside the US for 13 years already – as an expat in the UK and the Netherlands – and, while initially planning to return home to Texas, has ended up spending the past two years travelling and using her savings as a cushion.
“I sent home 30 per cent of my earnings for my three years in the UAE,” she says. “I bank with HSBC in three countries, so my leaving process was remarkably easy. I transferred everything in one wire transfer to my US account. Because the dirham is pegged to the dollar, I don’t think I lost anything.”
But Mr Vydelingum warns against using your bank to transfer large sums. “The fees can be high,” he says. “It is worth considering a regulated currency broker, as you could get a better exchange rate and lower transfer fee. If the current rate is favourable, you may be able to lock in the rate for future months. But do remember, a large transfer could be taxable in your home country.”
But what if the exchange rate is not favourable and your leaving date is fast approaching? Mr Vydelingum says it may be possible to keep a UAE bank account open after you leave, to make a transfer later on. “However, this is at the discretion of your bank, so do check with them first – and understand any continuing charges to keep the account open.”
Mr Instone says his ABC rule is that, “if you come from country A and live in country B, then bank in country C to make money movements easy”. That is to say, use offshore banking. “I would always recommend returning expats invest time finding the right banking platform,” he adds.
Ms Smith hit issues opening offshore bank accounts in the weeks leading up to her departure. “I left it too late and suddenly found Isle of Man banks needed a lot of proof of ID to satisfy anti-money laundering regulations. I had to get a lawyer to certify he had visited me at my address, as I did not have access to my title deed before selling the property and, because I was running out of time, paying for expensive couriers to send off the documents. Getting these three accounts set up delayed my return to the UK by two months.
“I had about Dh900,000, in all, to move after I’d sold up. Once I had my offshore accounts, I moved most of my dirhams to a dollar offshore account, as the pound rate wasn’t good. Six months on, with the rate better, I’ve just made that transfer onshore to a pound savings account, as the fees are high and the interest rates low offshore.”
Ms Smith says she did transfer smaller amounts when she first moved and brought about £8,000 (Dh43,065) cash into the UK – the amount allowed under UK law.
“I did think about leaving money in a National Bonds account, as you don’t need to be a UAE resident to have one of these, but ultimately the rate wasn’t good enough,” she adds.
What money issues should you consider at home?
When expats return home, they need to look in to their tax status, credit score and any unexpected expenses. Ms McFarling says she checked her US credit score before returning home to ensure there were no nasty shocks.
“It was in pretty good order and I was able to open a credit card with automatic approval. The $10,000 credit limit they gave me was quite low, but I didn’t challenge it.”
She also has had to consider tax.
“Americans are not tax-free abroad, but I had accumulated a lot of foreign tax credits from working in the UK for 11 years, so my tax burden ended up being only 10 per cent of my final year’s earnings.”
Ms Smith realised a few months after returning to the UK that she would end up paying capital gains tax on a 10-year Isle of Man offshore savings account, set up in lieu of a pension during her UAE years, which does not mature until 2018. “The early resettlement fees were prohibitive – something like $5,000 on a $100,000 investment. I won’t know until 2018 whether I can move the money into a pension and escape capital gains.” She also found that UK banks insist on three years’ worth of UK addresses to open an account – forcing her to stay with her old bank despite low interest rates.
Having rented her UK house out while overseas, she had filed tax returns every year. But Ms Smith is also finding it complex to pay voluntary national insurance (about £250 or Dh1,390 a year) for her time abroad, to ensure she reaches 35 years of contributions for a full state pension. “I’ve been talking to Revenue and Customs since October 2014 and I still don’t have an answer. I wish I’d done this years ago.”
For Ms Joe, the cost of schooling was unexpectedly high for her son, John. “I’m not au fait with Indian culture, having grown up in the Middle East. I pay up to 50,000 rupees a year for fees. I also had to get a tuk-tuk driver, as I couldn’t guarantee, with work, that I could get John to school at 8.15am each morning. We live a simple life, so I pay cash and don’t have to worry about my credit score, but there have been a couple of surgeries and some medication to pay for since returning – we had health insurance coverage in Dubai.”
Mr Vydelingum says returning expats might not have a true grasp of the cost of living for a few months.
“Although you can try to plan effectively before you move, only once you are back and fully integrated can you truly understand the financial impact,” he adds.
Moving your possessions home comes down to numbers
According to the removal comparisons site MoveSouq, the majority of international moves occur in January and February, the summer and at the end of the year.
The average quote is for a 20-foot container (25 to 28 cubic metres of possessions). But if that is too pricey, most people sell their larger furniture and get quotes for half a container, says Bana Shomali, the founder and chief executive of MoveSouq. UAE residents commonly move on to Australia, Canada, India, Lebanon, Qatar, the UK and US, she says.
Amy McFarling says she wanted a “big, reputable one-stop shop” for her shipping.
“I didn’t feel confident subbing out parts of the process and had heard a few horror stories about smaller companies.”
She sourced three quotations and picked Allied International.
“End-to-end packing and shipping for all the contents – including furniture – of my two-bed apartment came to a ballpark of $6,000,” she says. “There was a nasty surprise when my possessions got stuck in US customs for an extra day, to the tune of US$1,275, which I negotiated down to $900. But everything turned up in pristine condition.”
Linda Joe shipped about 50 kilos home to Kerala, India, paying about Dh25,000 in three batches.
“I got quotes from several Sharjah companies. Everything did arrive a little browned and toasted, but generally OK,” she says.
Jackie Smith had five quotes, ranging from 12 to 16 cubic metres and in cost from Dh8,800 to Dh16,300 for groupage (shared) sea shipping and Dh17,000 to Dh19,000 for an individual container.
Ms Smith chose Global Relocations for 12 cubic metres – 80 boxes – at Dh13,784 including insurance.
“I had a running spreadsheet to compare costs and options. I ultimately chose groupage as it was cheaper, but I went for lump-sum insurance at 3 per cent of the total value. I had been burnt shipping to Dubai nine years earlier, when I lost two boxes of CDs and DVDs and had underinsured.”
MoveSouq says it may also be worth shipping your car to Europe. It estimates the cost to be €5,245 (Dh28,538), including handling charges, technical modifications and registration paperwork.