This article was first published on August 7, 2012. It was updated on August 7, 2020.
How Working in United Arab Emirates (UAE) Impacts Your US Expat Taxes
American citizens are obligated to file US expat taxes with the federal government each year. 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 taxes the international income of its citizens and permanent residents, it does have provisions to protect us from double taxation. These include the Foreign Earned Income Exclusion, Foreign Tax Credit, and Foreign Housing Exclusion.
If you are an American living in UAE, you need to know how this will impact your US expatriate tax returns. This short video will provide you with a glimpse of how being an American living in UAE will impact your US expat taxes. More detailed information can also be found in our Country-Specific Guide to expat taxes UAE; click here to read it.
Do I need to file taxes if I’m living in the UAE?
YES! US citizens are required to file and pay US expat taxes on worldwide income. It does not matter if you’ve already paid UK taxes elsewhere. You still must file US expat taxes.
First, let’s start with your UAE filing requirements.
What tax rates will I see in the UAE as a resident?
There are NO TAXES in the UAE.
- You do not need to file a return
- You do not need to report worldwide income
- The only social security you pay will be to the US
- The only tax you will see in the UAE is a VAT… if they implement it in the future!
- There is no tax treaty with the US – but you won’t pay any UAE taxes!
Now, let’s move on to your US filing requirements
US expat tax year and due dates
2020 Tax year – January 1 through December 31
- July 15, 2020 – although expats get an automatic extension, due to COVID-19, the date has been extended for all Americans filing taxes.
- July 15, 2020 – The IRS announced on March 21st that all taxpayers—including individuals, trusts and estates, corporations, and those who pay self-employment tax—can defer payments penalty-free until the new deadline regardless of the amount due.
- October 15, 2020 – FBAR (Foreign Bank Account Reporting) form due to the US Department of Treasury has an automatic extension to October 15 for 2020.
- October 15, 2020 – All expats are eligible to extend their tax return due date to October. Expats who are not ready to file by June 15th can submit IRS Form 4868 to extend their tax deadline to October 15th.
- December 15, 2020 – Americans living abroad can write a letter to the IRS to request a final two-month extension to December 15th. Note: This is a discretionary extension and not automatically granted. Thus it should only be used as a last resort should you not have your proper paperwork in on time or other extenuating circumstances. Some expats may need more time to qualify for the Foreign Earned Income Exclusion, which, in most cases we recommend you file Form 2350 for additional time instead of trying a December extension.
US expat tax obligations
The US requires you to report your worldwide income on your tax return. All income is subject to taxation. However, the US has a number of provisions to help prevent double taxation. These include:
- The Foreign Earned Income Exclusion, which allows you to exclude up to $107,600 of foreign-earned income from your 2020 US taxes and up to $105,900 from your 2019 US taxes,
- The Foreign Tax Credit, which allows you to offset the taxes you paid to the UAE with your US expat taxes, dollar-for-dollar, and
- The Foreign Housing Exclusion, which allows you to exclude certain household expenses that occur as a result of your living abroad.
We offer resources and services to help you:
- Learn more about how your expat taxes are impacted when you live and work in the UAE by reading our Country-Specific Guide to the UAE.
- File amended tax returns and forms easily, accurately, and in a timely manner.
Need Help With Your US Expat Taxes in the UAE?
Discover more ideas on how to limit your tax liability by following Expatriate Tax Return Savings Tips on our website. If you have any more questions about your US expat taxes UAE and their implications or if you’d like to enlist our help in completing your returns, please contact us.