American expat taxes in UAE: US filing guide for United Arab Emirates residents

The UAE has a global reputation as a tax-free haven, making it a magnet for expats from all countries. But here's the thing: the tax picture isn't as simple as it seems.

Sure, there's no income tax in the UAE. But for US citizens and many other expats, that doesn't mean you're tax-free. Your home country may still require you to report, and in some cases, pay taxes on your income.

Do expats pay tax in Dubai?

• Dubai does not levy personal income tax on individuals, so paychecks are not taxed like they are in many countries.
• The taxes most people notice day to day are VAT at 5%, and corporate tax can apply to business profits.
• US citizens still have US filing obligations on worldwide income.

In this guide, we'll cover all of this in more detail. We'll look at what it means to be a UAE resident, the basic tax rules, and how they affect expats, with a focus on expat tax UAE compliance from a US reporting point of view.

This article is brought to you by Taxes for Expats (TFX). Living or working in the UAE and need help with your US taxes? Contact us today.

Overview of the UAE taxes

Who is considered a resident of the UAE?

In the UAE, residency is all about your visa. It's not the same as tax residency in other countries. If you're an expat working in Dubai or Abu Dhabi, you probably have an employment or investor visa. That's what gives you the legal right to live here.

Now here's the interesting part: unlike many places, the UAE does not charge income tax to its residents. That's a big reason why so many people are drawn here. But there have been some updates, such as the introduction of corporate taxes, which have put more focus on the definition of residency - especially for businesses.

Under Cabinet Decision No. 85 of 2022, a natural person can be treated as a UAE tax resident if any of these apply:

• 183 days or more physically present in the UAE within a relevant 12-month period
• 90 days or more physically present in a relevant 12-month period, and you hold a valid residence permit (or are a UAE or GCC national), and you have a permanent place of residence in the UAE, or carry on employment or business in the UAE
• Your usual or primary place of residence and the center of your financial and personal interests are in the UAE (or you meet the criteria set by the Minister) 

A UAE residence visa is an immigration status. UAE tax residency is a legal test with its own rules, and it can matter for documentation, withholding, and residency proofs.

NOTE! Even if you're a UAE resident, your home country may still consider you a tax resident. This can lead to double taxation - something expats need to be aware of.

This difference is especially for tax residency rules in Dubai, UAE, for expats who need formal proof for banking, government processes, or cross-border paperwork.

Tax Residency Certificate (TRC): If you meet the UAE tax residency rules, you can apply through the Federal Tax Authority for a Tax Residency Certificate. The FTA explains how the certificate is issued and delivered through its TRC service platform.

For the US side, a handy reference point is the Substantial Presence Test calculator (US residency rules are different).

Does the United Arab Emirates have taxes?

The UAE is often described as “tax-free,” but that label needs nuance. While there is no personal income tax on salaries, the country does levy indirect taxes, most notably 5% VAT on many goods and services.

In recent years, the UAE has also introduced a federal corporate tax, reflecting its alignment with global tax standards. As of now, businesses pay 9% corporate tax on taxable income above AED 375,000, while income below that threshold remains taxed at 0%. 

Is the UAE tax-free for foreigners?

Yes, the UAE is largely low-tax for foreigners, especially when it comes to personal income. That's a big reason why millions of expats move here - to enjoy more financial freedom and make the most of their earnings. 

But let's be clear: "tax-free" doesn't mean there are no taxes at all. Here's what you need to know:

• Everyday life includes VAT (5%) and excise taxes on certain products.
• Companies owned by foreigners in Dubai may now be subject to a 9% corporate tax, depending on their taxable income and where they operate.
• If you're a US citizen, you still need to report your worldwide income and may owe taxes back home.
• Corporate tax technical point: The 9% rate applies to taxable income above AED 375,000 – not revenue. 

Official text and UAE government announcements describe the AED 375,000 threshold and the 9% rate this way. 

Three quick lenses (so it’s not one-size-fits-all):

1. Individuals: UAE personal income tax for expats is not levied – salaries are not taxed like they are in many countries.
2. Employees: Most employee “tax” is indirect – VAT and certain fees built into daily life.
3. Business owners and freelancers: The story can change – corporate tax rules may apply to profits, even when personal wages are not taxed. 

Running business in the UAE? We can help you with your US tax return

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Types of taxes in the UAE

Value-Added Tax (VAT)

The UAE introduced a 5% value-added tax on January 1, 2018. It applies to most goods and services, including everyday expenses such as shopping, eating out, and utilities. 

The good news? Essentials like healthcare, education, and public transportation are either zero-rated or exempt, so they won't add to your costs.

Here's how VAT works for businesses:

• Mandatory registration: annual taxable supplies over AED 375,000

• Voluntary registration: taxable supplies between AED 187,500 and AED 375,000 

Some items are taxed at 0%, including:

• Exports and international transportation
• Investment metals (such as gold and silver)
• Newly built residential properties
• Health and education services

Who pays and when it matters to expats: For US expats, VAT is the primary tax you'll encounter in the UAE. While it's relatively low compared to other countries, it's worth factoring into your cost of living. VAT shows up in day-to-day spending, so it affects budgeting more than filing. This is usually the most visible piece of Dubai tax for expats. 

Corporate tax

In 2023, the UAE underwent a big change when the corporate tax system was introduced. Here's what you need to know:

• Companies earning more than AED 375,000 (about $102,000) a year will now be subject to a 9% corporate tax rate.
• Companies involved in oil and gas exploration and production are taxed at a progressive rate of up to 55%.
• Branches of foreign banks are taxed at a flat rate of 20%.
• Companies located in free zones may continue to benefit from tax incentives, but only if they meet certain regulatory requirements.
• Multinational companies operating in the UAE must comply with the OECD's global minimum tax rules.

Who pays – when it matters to expats: Employees usually do not feel this directly. It matters most when running a company or freelancing, which is why “income tax in Dubai for expats” often gets mixed up with corporate tax rules. 

US expat running a UAE business and freelancing: what changes?

US tax rules do not care that local personal income tax is zero. Net self-employment income is still reportable in the US, and the foreign housing exclusion does not reduce the US self-employment tax. 

Also, the US list of Social Security totalization agreement countries does not include the UAE, so there is usually no treaty-style relief in that area. 

Property tax

There is no traditional property tax in the UAE, but there are a few property-related fees you should be aware of:

• Property registration fees: Typically 4% of the property's value, these are paid during the transaction process.
• Annual maintenance fees: Property owners pay these fees to maintain common areas in residential or commercial buildings.
• Rental income tax: There isn't one. That's right - rental income is untaxed, making the UAE a prime location for real estate investors.

These costs are far lower than property taxes in many other countries, which is why Dubai remains a top choice for real estate investment.

Who pays and when it matters to expats: Mostly relevant when buying or renting property, not for annual income tax filings.

Capital gains tax

There is no capital gains tax in the UAE - not for individuals or companies.

Here's what that means:

• No local tax: Whether you're selling real estate, stocks, or other investments in the UAE, there's no capital gains tax to worry about.
• For US citizens: Here's where it gets tricky. If you're an American expat, any capital gains you earn in Dubai are still subject to US tax because of global income reporting rules.

Who pays - when it matters to expats: This is usually a US-side reporting issue more than a UAE-side one.

Excise tax

The excise tax, introduced in 2017, is designed to encourage healthy lifestyles and increase government revenue.

This tax targets products deemed harmful to health or the environment, including:

• Tobacco products: 100% tax.
• Sweetened beverages: 50% tax.
• Energy drinks: 100% tax. 

If you're a fan of sugary sodas or energy drinks, expect to have to pay more. While this tax may not affect everyone's daily life, it's worth considering in your budget when buying certain products.

Who pays and when it matters to expats: Consumers feel this at checkout. It’s part of the broader picture of UAE taxes for expats beyond paychecks. 

Dubai vs. Abu Dhabi: Tax differences and similarities

Dubai and Abu Dhabi are the two centers of the UAE, and while they share many similarities in tax policy, there are a few key differences that are worth noting - especially for expats and entrepreneurs.

What's the same?

• Both emirates follow the UAE's national policy of no personal income tax.
• VAT of 5% applies in all emirates, including Dubai and Abu Dhabi.
• The upcoming 9% corporate tax is set by the federal government and applies to companies nationwide, with exemptions for certain free zone businesses.

What’s different?

Real estate fees:

• In Dubai, real estate transfer fees are 4% of the property's value.
• In Abu Dhabi, they are lower at around 2%.

Free zones:

• Dubai has many free zones that cater to different industries and offer attractive incentives.
• Abu Dhabi also has free zones, but they tend to be more focused on government industries such as energy and defense.

Although not a tax, the cost of living - especially housing - is higher in Abu Dhabi, which can affect your finances as an expat.

US taxes for Americans living in the UAE

Living in the UAE offers a tax-free personal income environment, but US citizens and green card holders must still comply with US tax laws, which include strict reporting requirements.

Despite the UAE's tax-free policies, US citizens must comply with the following requirements

• Worldwide income reporting
  All worldwide income must be reported on your US tax return (Form 1040), regardless of where it's earned. You may be eligible for the Foreign Earned Income Exclusion (Form 2555), which allows you to exclude up to $120,000+ of foreign-earned income, or the Foreign Tax Credit (FTC) to offset taxes paid in other countries.
• Foreign Bank Account Report (FBAR)
  If the total balance of your foreign bank accounts exceeds $10,000 at any time during the year, you must file an FBAR (FinCEN Form 114). Failure to comply can result in severe penalties.
• FATCA (Foreign Account Tax Compliance Act)
  Expats must also report certain foreign financial assets if they exceed certain thresholds (e.g., $200,000 for single expatriate filers) by filing Form 8938.

While the UAE offers incredible local tax exemptions, your US obligations don't go away. Compliance with FBAR, FATCA, and global income reporting rules is critical to avoid penalties and ensure peace of mind. 

Important deadlines for US taxes

• April 15 - Although expatriates receive automatic extensions until June 15, if taxes are owed, interest begins to accrue on April 15.
• June 15 - US expatriate taxes are due unless you have filed for and received an extension. 
• April 15 - The FBAR form is due, with an automatic extension to October 15. 
• October 15 - If you have received an extension, your expatriate taxes are due on this date.

This is the reality of American expat taxes in the UAE – the UAE side can be simple, and the US side can be paperwork-heavy.

Solve your tax question – ask professionals

Overwhelmed by taxes? With the right information, it gets easier. 

Common “red flag” situations that often need extra care:

• You own or run a business, freelance, or receive non-salary income
• You hold equity, stock options, or RSUs from a US or foreign employer
• You have foreign bank or investment accounts (FBAR/FATCA may apply)
• You own foreign funds or ETFs that could be treated as PFICs
• You’re unsure about US state tax residency after moving or living abroad

Submit your question, and you’ll receive an answer from tax experts within a few business days. While we can’t provide detailed consultations without reviewing your documents, we’ll do our best to assist.

Does the US have a tax treaty with the United Arab Emirates?

The United States does not have a tax treaty with the United Arab Emirates. Tax treaties are designed to prevent double taxation and clarify how cross-border income is taxed.

At first glance, the lack of a treaty may seem like a disadvantage for US citizens living in the UAE. However, the UAE's tax-free personal income policy makes up for this. With no local income tax, the chances of double taxation are minimal - most concerns arise from US tax obligations.

For Americans, the real focus should be on compliance with US tax laws, such as reporting worldwide income and taking advantage of benefits such as the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC) where applicable.

Conclusion

The UAE's tax-free income policies and exceptional lifestyle make it a top choice for expats, including Americans. It's a place where financial opportunity meets world-class amenities. However, the lack of a tax treaty with the US can complicate matters when it comes to managing your tax obligations. With the right planning, you can keep the burden low and enjoy everything the UAE has to offer.

Two-step takeaway:

• The UAE side is simple for employees.
• The US side still requires filings – and for many people, expat US tax in Dubai comes down to getting the forms and deadlines right.

That's where we come in. At Taxes for Expats, we specialize in helping Americans navigate the complexities of expatriate taxes. With over 20 years of experience and more than 50,000 returns filed, our team provides the personalized service you need to stay compliant and worry-free.

Ready to simplify your expat taxes? Let's work together to make your move to the UAE as seamless as possible.

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