US Expat Taxes Explained: Filing Taxes as an American Living in the UAE

The United Arab Emirates (UAE) has an expatriate population of 9.5 million and is internationally renowned as the center for finance and commerce in the Middle East. And, the UAE is increasingly promoting itself as a tax haven. If you are an American expatriate, however, you continue to be subject to US expat taxes no matter where you live. This somewhat dilutes the low tax appeal of the UAE. The guide below will help you understand your tax responsibilities as an American expatriate in Abu Dhabi, Dubai, or anywhere else in the United Arab Emirates.

UAE Income Tax Rates

There is no federal tax legislation in the United Arab Emirates, and the UAE is considered a no-tax country. There is currently no income tax, no corporate tax, no withholding, and no capital gain tax. Certain businesses, most notably in the finance and petroleum producing industries, are subject to taxation, but most corporate entities are exempt. However, since January 1, 2018, the UAE will be introducing a Value Added Tax (VAT) of up to 5% on goods and services unless a special exemption applies.

UAE Tax Due Date

There is no income tax collected from individuals, and filing a return is not required. Further, foreign income (from outside the UAE) is not taxed by the UAE, which means you just need to worry about your US taxes.

Taxation of American Expats

If you are an American citizen or permanent resident, you are obligated to file US expat taxes with the federal government each year whether you reside in Albuquerque or Abu Dhabi. In addition to the regular income tax return, you could also be required to file an informational return on your assets held in foreign bank accounts. While the US is one of the few governments that tax the worldwide income of its citizens and permanent residents, it does have special provisions to help protect us from double taxation, including:

  • The Foreign Earned Income Exclusion, which allows you to decrease your 2019 taxable income by the first $105,900 earned as a result of your labor while a resident of a foreign country (and by $103,900 for your 2018 taxable income);
  • The Foreign Tax Credit that could allow you to lower your tax bill on your remaining income by certain amounts paid to a foreign government; and
  • Foreign Housing Exclusion that allows an additional exclusion from taxable income for certain amounts paid for household expenses that occur as a consequence of living abroad.

With proper planning and quality tax preparation, you should be able to take advantage of these and other strategies to minimize or even eliminate your liability on US expat taxes. Please note that even if you do not believe that you owe any US expat taxes, you may still be required to file a return.

UAE Social Security

Expatriate employees are not required to make social security contributions. Again, part of your US taxes will go toward US Social Security.

US Tax Treaty with UAE

The UAE has tax treaties with a number of countries but not with the US. Luckily, your UAE sourced income is taxed only via your US taxes.

Implications of Being a Self-Employed American in the UAE

Again, in the United Arab Emirates, most businesses and individuals do not have to file or pay income taxes. Therefore, from a tax perspective, there is nearly no difference between employees and the self-employed. The UAE defines seven distinct business entities that provide various degrees of legal protection and require various reporting and compliance obligations. However, as there are no corporate taxes on most businesses, there are no tax consequences related to the different entities. Note: foreign investors are generally required to have a UAE partner in order to do business in the UAE.

As a reminder, you are required to file US expat taxes if you have earned $400 or more from self-employment.

Have Questions About Your US Expat Taxes in the UAE?

We’re here to help! Our team of expat-expert CPAs and IRS enrolled agents are here to help you navigate your tax obligations while living overseas as a US expat – contact us today! Ready to file? Get started today.

Originally published in 2011; updated March 27, 2019.

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