Expat Taxes in the United Arab Emirates: What You Need to Know
- Living as an Expat in the United Arab Emirates
- UAE at a Glance
- What Are UAE Taxes like for US Expats?
- Who Has to File Taxes in the United Arab Emirates?
- Who Qualifies as a Tax Resident in the United Arab Emirates?
- What Types of Taxation Does the United Arab Emirates Have?
- What Tax Forms Do Americans Living in the UAE Have to File?
- What Tax Deductions Are Available for Expats Living in the UAE?
- Does the US Have a Tax Treaty with the United Arab Emirates?
- Does the US Have a Totalization Agreement with the United Arab Emirates?
- Navigating Tax Compliance for US Expats in the UAE
Living as an Expat in the United Arab Emirates
The United Arab Emirates (UAE) is widely regarded as the center for finance and business in the Middle East. It’s also home to a thriving expat community. In fact, roughly 88% of the population of the UAE is made up of expats from around the world. As you can imagine, that percentage includes plenty of US expats—most of which live in Dubai.
But what are UAE taxes like for US expats living abroad? Let’s take a look.
UAE at a Glance
- Primary Tax Form for Residents: UAE does not have a federal income tax
- Tax Year: N/A
- Tax Deadline: N/A
- Currency: United Arab Emirates Dirham (AED)
- Population: Approximately 9.9 million
- Number of US Expats: Approximately 50,000
- Capital City: Abu Dhabi
- Primary Language: Arabic
- Tax Treaty: No
- Totalization Agreement: No
What Are UAE Taxes like for US Expats?
The United Arab Emirates is generally recognized as a tax haven and even a no-tax country. This is because the UAE imposes virtually no taxes on its citizens or foreign residents. The UAE has no:
- Income tax
- Withholding tax
- Capital gains tax
Some oil companies and foreign banks may be subject to taxation, but most corporate entities are exempt. For the most part, the only tax that the UAE imposes is a value-added tax.
However, Americans living abroad in the UAE still have US filing obligations. All US citizens are required to file a US tax return regardless of where they live in the world. You may also have to file certain other tax forms. (More on those below.)
Who Has to File Taxes in the United Arab Emirates?
Almost no one in the UAE has to file or pay any taxes at all on their UAE-source or foreign-source income. This applies whether you are:
- A citizen
- A foreign resident
Even businesses are typically exempt from any taxation. (Though it’s worth noting that foreign investors are generally required to have a UAE partner in order to do business in the UAE.)
Who Qualifies as a Tax Resident in the United Arab Emirates?
In the United Arab Emirates (UAE), individuals are considered tax residents if they meet any of the following criteria:
- They have physically resided in the UAE for at least 183 days in a calendar year.
- Their stay in the UAE is not interrupted and meets the 183-day requirement over a period of 12 months.
- They have a valid residence visa issued by the UAE government.
Once an individual qualifies as a tax resident in the UAE, they are required to declare their worldwide income to the UAE tax authorities and file their tax returns accordingly. However, the UAE does not levy personal income tax on individuals, except for certain industries such as oil and gas and financial institutions.
Learn where the best tax havens are, common traps, and ways to save money on your US expat taxes.
What Types of Taxation Does the United Arab Emirates Have?
The only form of taxation that will impact most US expats living in the UAE is a value-added tax (VAT). This tax was first introduced on January 1, 2018, and has been in effect ever since.
If a business’s taxable supplies and imports exceed AED 375,000 per year, it must register for the VAT unless exempt. For businesses whose taxable supplies and imports are between 187,500–375,000 AED per year, registering for the VAT is optional. Once registered, a business may apply to de-register from the VAT if their taxable supplies and imports dip back below 187,500 AED for a full year.
The standard rate for this tax is 5%. However, some services and products may be taxed at a rate of 0%. These include:
- Exporting goods and services outside of the Gulf Cooperation Council
- International transportation and related supplies
- Transportation by sea, air, or land (such as ships and aircraft)
- Investment-grade precious metals
- Newly constructed residential properties
- Education services and related supplies
- Healthcare services and related supplies
Foreign businesses and visitors may claim a refund for any VAT they incur while visiting the UAE.
A tiny minority of businesses may be taxed in the UAE.
- Upstream oil and gas companies may be taxed at progressive rates of up to 55%
- Branches of foreign banks may be taxed at a flat rate of 20%
As of June 2023, all companies operating in the United Arab Emirates are subject to a new 9% corporate tax rate. This marks a significant policy shift, potentially impacting the financial performance and strategic planning of businesses in the region.
The UAE imposes an excise tax on certain goods considered harmful to human health. These include:
- Tobacco products
- Electronic smoking devices
- Energy drinks
- Carbonated drinks
- Sweetened drinks
What Tax Forms Do Americans Living in the UAE Have to File?
There are no UAE tax forms that most Americans living abroad in the United Arab Emirates would ever need to file. But as a US citizen, you will always need to file at least one US tax form, and possibly more. Let’s take a look at the most common examples.
IRS Form 1040: Individual Income Tax Return
Form 1040 is the standard US individual income tax return. Every US citizen is required to file this form no matter where they live and work.
Typically, taxpayers must file Form 1040 by April 15th (April 18th, 2023). However, the IRS automatically extends expats’ due date to June 15th, 2023. Taxpayers can also request a further extension to October 16th, 2023.
IRS Form 8938: Statement of Specified Foreign Financial Assets (FATCA)
If you own non-US financial assets above certain thresholds, you must file a FATCA report. The specific threshold depends on your filing status as well as whether you are a bona fide resident of the UAE.
Once you’ve completed your FATCA report, file it with your Form 1040.
FinCEN Form 114: Report of Foreign Bank and Financial Accounts (FBAR)
If you have a total of at least $10,000 in one or multiple non-US bank accounts, you have to report it by filing FinCEN Form 114, better known as FBAR.
This form must be filed electronically through the FinCEN BSA E-Filing System. As with Form 1040, the standard due date is April 15, but if you miss that deadline, there’s an automatic extension until October 15.
What Tax Deductions Are Available for Expats Living in the UAE?
The IRS also provides several other potential tax credits and deductions for expats, such as the Foreign Earned Income Exclusion and Foreign Housing Deduction. The Foreign Tax Credit is also technically available, but because the UAE has no income tax, this credit won’t be useful for US expats living in the UAE.
Just remember, even if you don’t end up owing any US taxes, you’re still required to file a return.
Does the US Have a Tax Treaty with the United Arab Emirates?
No, there is currently no US-UAE tax treaty. However, because the UAE has no income tax, Americans living abroad in the UAE are only required to file US taxes anyway.
Does the US Have a Totalization Agreement with the United Arab Emirates?
No, there is currently no US-UAE totalization agreement. However, US expats employed in the UAE are not obligated to make any social security contributions to the UAE. This means that even without a totalization agreement, you don’t have to worry about paying into multiple social security systems.
Navigating Tax Compliance for US Expats in the UAE
Hopefully, after reading this guide, you will have a better understanding of how the UAE’s tax policies impact US expats. Want to learn more? Contact us, and one of our Customer Champions will happily address all your concerns.
If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.