Attractive tax rates prompt GCC expatriates to stay put
Dubai - For NRI business owners, whose average length of stay in the GCC is 18.1 years, low corporate and value-added tax rates were key drivers for staying put in the region.
For non resident Indians (NRIs) - who stay in the GCC the longest among foreign nationals - and Western expatriates, the most frequently cited reason for staying in the Gulf is attractive tax rates, a study by Invesco revealed on Monday.
For NRI business owners, whose average length of stay in the GCC is 18.1 years, low corporate and value-added tax rates were key drivers for staying put in the region. For Western expatriates, zero per cent personal tax rates were cited as the key driver for their stay in the Gulf averaging at 12.9 years, the Invesco survey of asset managers showed.
For Western expatriates, the rate was not only attractive relative to home markets (such as the UK) but also attractive relative to other expatriate centres such as Singapore, the study said.
For Arab expatriates, whose average length of stay is 16.9 years, security was seen as a key driver given the ongoing political instability across Mena.
Many participants in the survey highlighted client positivity towards work/life balance in the region. While work/life balance is not a key 'pull' factor into the region, it ranked highly as a driver in keeping clients as residents, said Nick Tolchard, managing director of Invesco Middle East.
"There were a number of specific references to improvements in working hours at multinational financial services companies. This factor was less relevant for NRIs, with respondents explaining that business owners worked long hours wherever they are based," the study said.
Many of the younger generation of NRIs were born in the region and consider the GCC their home market. The use of 'sponsorship' and non-executive roles is common for NRI business owners to ensure the older generation can retire in the region. In fact, respondents expect a small percentage of expatriates to retire within the GCC, said the study.
Analysis of expatriates leaving the region adds another positive perspective on length of stay in the GCC. Job losses are the most frequently cited factor for leaving the region and retirement is the third most common factor.
This means that two of the top three responses are 'push' factors outside an expatriate's control. Caring for parents and having children are the other important drivers.
However, many respondents noted that the quality of schools in the GCC was improving, so challenges with education were reducing. In fact, many GCC advisers viewed saving for education as a key financial planning need that the industry should focus on, the study said.
The study showed that the GCC states have some of the largest expatriate populations in the world. All six GCC states have higher weightings to expatriates than any of the largest six economies in the world and, among them, the UAE has the largest expatriate percentage in the region.
"Historically, lower length of stay has been viewed as a potential challenge by wealth managers because highly mobile expatriates are less likely to commit to long-term savings and investments. However, with target clients planning to stay in the region for the longer term, wealth managers see increased demand for wealth management services," said Tolchard.