Middle Eastern countries don’t tax individuals whereas most expats come from countries where they do pay tax. This often makes it difficult to compare packages.
I find the only way to properly compare packages is to work out the take-home pay for the Middle Eastern package and then calculate what you have to earn in your home country to match it.
Let’s take an example of a person who is on the following package in Dubai, UAE:
- Basic salary AED 25 000 pm
- Free accommodation (e.g. 3-bedroom villa in a 4-star western compound)
- Free transportation (e.g. BMW 3 series, fully fuelled, fully maintained)
- Free hospital cover
The take home pay is AED 25 000 per month.
Now let’s see how this compares to a South African package.
AED 25 000 equals about 90 000 South African Rands (as of Feb 2017). In order to put that R90 000 in your pocket you first have to pay for your house, car and medical (which are provided free in the Middle Eastern package).
A three bedroom house in an upmarket housing estate in Johannesburg or Cape Town costs around R20 000 per month, a BMW 3 series (with fuel and full maintenance) costs around R15 000 per month and a Discovery Health hospital plan costs around R5 000 per month.
We are now up to R90 000 take-home pay + R20 000 house + R15 000 car + R5 000 medical. This R130 000 is paid out of after-tax money.
If you’re on a 35% tax rate then you have to earn a gross, before tax amount of around R175 000 per month.
In summary, to match an offer of AED 25 000 + house + car + medical per month in Dubai you have to earn around R175 000 gross per month (Total Cost To Company) in South Africa.
That’s the simple calculation but there’s a bit more to it:
- The cost of living in Dubai is about twice that of South Africa. However this only really applies to food, clothing and entertainment as your accommodation, transport and medical is already taken care of.
- You would be unwise to keep an empty house in South Africa, especially if you are still paying for it. This negates the benefit of getting free accommodation in Dubai. Rather sell your house or rent it out to get the best financial return.
- Similarly, leaving a car in South Africa when you are living in Dubai is not the best decision. Sell your car.
To fine-tune these calculations one would have to study the relevant tax tables and costs of living in the two regions on sites like Numbeo.