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Pocket Guide to the United Arab Emirates

Key facts about the United Arab Emirates

• The UAE has the seventh-largest proven crude oil reserves in the world
• The AED Dirham is pegged to the US dollar at a rate of 3.6725 per 1 USD.
• The emirate of Dubai ranks as the 15th biggest financial centre in the world
• The United Arab Emirates tax regime: 0% personal income, 0% on income generated outside of the UAE, 0% corporate income tax.

Australians moving to the UAE: What to know

The United Arab Emirates (UAE) is a growing destination choice for Australians looking to move abroad. It’s two main Emirates, Dubai and Abu Dhabi, have become thriving hubs for international businesses. The UAE’s advantageous no-tax jurisdiction, combined with the family-friendly appeals of the expat lifestyle, make it a favoured destination for Aussies.

Immigration

Aussies looking to live and work in the United Arab Emirates for an extended period of time should be aware of the legal visa requirements before moving.
Expats require a residence visa to live in the UAE. While a residence visa is not the same as a work permit, it is usually sponsored by your employer. Without a residence permit it will not be possible to obtain a work permit, open a bank account, rent a property, get a driver’s license or buy a car. There are a number of different residency visas available including:

• Employment – valid for two years
• Family – valid for two years
• Student – valid for one year
• Domestic Helpers – valid for one year
• Investors – valid for up to three years

For Aussies moving to the UAE for work, the residence and work visas are typically sorted by your employer, which will submit all the relevant documentation on your behalf, as well as carry the costs. It has been standard practice for employers to also process residence visas for the spouse and/or children of their expat employees. Valid residence visa holders are eligible to a spouse and/or child providing they meet the minimum salary requirements stipulated by the Department of Naturalization and Residency. The UAE does not allow a sponsor to be a boyfriend, girlfriend or common-law partner; the couple must have a valid marriage certificate as proof of their relationship.

Banking and Finance

The UAE has a sophisticated and open banking system, with plenty of local and international options for Australians.

Personal Banking

While expats tend to gravitate to international banks they recognise, there are a plethora of reliable local banking options available in the UAE including Emirates NBD, National Bank of Abu Dhabi, First Gulf Bank, Dubai Islamic Bank and Abu Dhabi Commercial Bank. Provided you have the right paperwork, opening a local bank account should not be too difficult. You’ll need a valid passport, a Residence Permit, and a No Objection Letter, which is a letter from your employer (visa sponsor) giving details of your salary. You may also be asked to supply a tenancy agreement.

The UAE still relies on the archaic payment system of cheques for large financial transactions. Expats can issue cheques for largely anything, and they remain the primary payment method for big-ticket purchases like cars and rent payments. While cash and cheques retain remain overwhelmingly popular, according to RFi Group the proportion of consumers with contactless cards in the UAE nearly doubled to 13% between 2014 and 2015, suggesting that take-up is on an upward trajectory.

ATMs are widely available throughout the UAE and there is no charge for drawing cash from different bank’s machine.

Currency

The AED Dirham (DHS) began circulating in 1971 when it replaced several currencies being used throughout the country, including the Dubai riyal, the Qatar riyal and the Bahraini dinar.

The UAE’s heavy dependence on oil prompted the government to peg the currency to the US dollar in 1997 at a rate of 3.6725 (1 USD = 3.6725 dirham). Global oil prices are denominated in US dollars, so by pegging their currency the authorities sought to reduce the volatility in the value of its major export.

1 Australian dollar will roughly buy 2.6 Dirham (you can check FlashFX currency calculator for up-to-date AUD/AED exchange rate). Because of the USD peg, the factors that influence the Australian dollar to the UAE Dirham exchange rate are the same as those that impact the Australian dollar to the US dollar exchange rate.

Cost of Living

Although Australians living in the UAE won’t pay any income tax, expats have historically faced spending challenges due to the high rental costs and expenses related to raising children. A 2016 survey by HSBC revealed that UAE school fees were the ‘second highest in the world’, with only Hong Kong ranking higher. Their data showed that sending a child to school from primary school to university in the UAE will cost about Dh365,025, or A$135,195. Australia ranked 7th on the list with average parental spend around A$49,440.

Rental costs, on the other hand, make up a significant portion of an expat’s annual budget, accounting for over 40.0% of total expenses. According to Numbeo, an international price aggregation website, rents in the United Arab Emirates are 6.0% higher than in Australia (average data across all cities).

Despite these two areas of higher spending, the overall cost of living in the United Arab Emirates remains well below that of Australia and is trending lower. Numbeo puts Dubai (210th), the most popular city for Aussie expats in the UAE, a massive 178 places behind Sydney (32nd) and 146 places back from Melbourne (64th) on its global cost of living index.

For Aussies considering a move to the UAE you’ll be happy to know that Mercer’s 2018 annual cost of living survey showed Dubai and Abu Dhabi both falling out of the world’s top 25 most expensive cities for expats. Dubai dropped from 19th to 26th place while the UAE’s capital city was rated 40th as compared to 22nd in 2017. The drops were attributed to decline in rents, strengthening of the dollar-pegged dirham against other currencies and lower oil prices. Encouragingly, these declines happened despite the introduction of a value-added tax (VAT) earlier this year.

AUD to AED Exchange Rate

What Influences the AUD/AED Exchange Rate

Monetary Policy

As mentioned earlier, the UAE’s currency is pegged to the US dollar at a price of 3.6725 dirham per US dollar. Due to the peg, the UAE effectively ‘imports’ the monetary policy set by the US Federal Reserve, meaning that the UAE Central Bank cannot maintain an independent monetary policy.

The currency peg forces local interest rates in the UAE to follow those in the US, even when the economic outlooks of the two countries diverge. The inability of the UAE Central Bank to raise interest rates independently of the US has meant that local regulators are forced to rely on macro-prudential regulation, such as limiting borrowing capacity, to control overall credit growth in the local economy.

What this means in practice for the AUD/AED exchange rate is that the monetary policy paths, and specifically the interest rate differentials, between the United States and Australia will have the biggest influence on the direction of the AUD/AED.

Market Factors

The UAE’s unique exchange rate regime precludes the currency from reacting to broader global market trends that would usually impact a country with a floating exchange rate. For example, although the UAE economy is highly reliant on petroleum exports, a substantial drop in oil prices will have a minimal impact on the value of the AED.

AUD/AED Snapshot

The AUD/AED exchange rate will fluctuate due to changes in relative valuations between the US dollar and Australian dollar. Factors that could impact the value of the currencies include: changes in US monetary policy, U.S economic data and any shifts in demand for Australian commodities like iron ore and coal.

If you are keen to stay on track of currency movements for both the AUD/AED and AUD/USD exchange rates, you can sign up to FlashFX’s rate alert emails. Simply entire the rate you want to keep an eye on and we will email you when the mid-market rate reaches that level.

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