Taxes in Dubai and the UAE for US Expats

In recent years, Dubai has become a global hub for entrepreneurs and business, in no small part because taxes in Dubai are minimal. The business-friendly tax laws in the United Arab Emirates (UAE) — where Dubai is located — include no personal income taxes, no capital gains taxes, and low corporate taxes.

On top of that, the country offers an exceptionally high quality of living. The UAE is known for its safety, great entertainment options, excellent beaches, and much more.

Thinking about moving to this warm, sunny, diverse, and innovative country? Below, we’ll go over everything US expats need to know about taxes in the UAE, from personal income taxes to corporate taxes, property taxes, and more.

Snapshot of taxes in the UAE

• Primary tax forms: N/A
• Tax deadline: N/A
• Tax authority: Federal Tax Authority 
• Administrative language(s): Arabic
• US Tax treaty? No
• Totalization agreement? No

Determining UAE tax residency & liability

The UAE government considers anyone who meets any of the following qualifications to be a UAE tax resident:

• Maintains a home or primary financial and personal interests in the UAE, OR
• Is physically present in the UAE for 183 days or more in a consecutive 12-month period, OR
• Is physically present in the UAE for a period of 90 days or more in a consecutive 12-month period, AND:
  • Is a national of the UAE or any other Gulf Cooperation Council (GCC) member state, or has a UAE residence permit, AND:
    • Has a permanent home in the UAE, OR
    • Works or has a business in the UAE

Fortunately, just because you’re a UAE tax resident doesn’t necessarily mean you have to pay taxes there.

Understanding the UAE tax system & deadlines

The Federal Tax Authority is the government office responsible for administering and overseeing taxes. Additionally, the UAE Ministry of Finance disseminates information related to domestic financial affairs.

However, because there are no personal income taxes, there isn’t a standard tax return.

That said, recent legislative changes mean businesses and self-employed individuals may be subject to income tax at the corporate level — more on that below. 

Taxation of income in the UAE

As we have already discussed, there is no personal income tax rate in the UAE, but there are two situations in which someone may need to pay income taxes:

• If they own a business in the UAE
• If they’re self-employed

Corporate taxes in the UAE

The UAE had no corporate income tax until recently.

In December 2022, the country introduced a federal corporate tax regime effective for financial years beginning June 2023 onward. 

In doing so, the UAE can capitalize on its growing reputation as a global business hub to generate tax revenue while also aligning with international tax compliance and enforcement guidelines like the OECD Base Erosion and Profit Shifting Project. 

Under the new law, the government will levy corporate taxes at a flat rate of 9% on taxable income exceeding AED 375,000 (~$102,110) and 15% on multi-national enterprises.

Businesses incorporated in the UAE before March 2024 will have between May 31st and December 31st to submit their tax registration application. Those established after or that have not yet received a business license must apply within three months of the date of incorporation.

Self-employment taxes in the UAE

Freelancers, independent contractors, entrepreneurs, and other self-employed individuals conducting business and commercial activities in the UAE are also subject to taxes at the corporate level.

Those who earn an annual income of AED 1 million (~$272,292) with at least AED 375,000 (~$102,110) in profits are subject to corporate taxes. The government will levy a corporate income tax rate of 9% on any taxable income over AED 375,000 (~$102,110) — making any income below that tax-free.

Tax credits & deductions

There are several different ways that those who are subject to UAE corporate taxes may mitigate their tax liability, including:

• A foreign tax credit: Those who pay foreign taxes on UAE-sourced income are eligible for dollar-for-dollar tax credits they can apply toward their UAE taxes, up to the amount due
• Small business relief: Those whose taxable income does not exceed AED 3 million (~$816,877) between the current and previous tax periods can apply for a 0% tax treatment
• Incorporating in a free zone: In the UAE, there are a number of “free zones,” or designated areas with tax incentives and benefits for those who do business there. Registering a business there allows you to qualify for a 0% tax rate on qualifying income

Other taxes in the UAE

Capital gains tax

Good news – there is generally no capital gains tax for individuals living in the UAE.

Social security taxes

Only UAE and other GCC nationals need to pay into the social security system.

UAE nationals typically have 20% of their paychecks withheld for social security or 5% in a free zone or the emirate of Abu Dhabi. Nationals of other GCC member states pay at rates determined by their individual countries.

Property taxes

The UAE does not impose property taxes on residential properties as such.

There may be other costs associated with purchasing and owning property in the UAE, including:

• Registration/transfer fees
• Mortgage registration fees
• Service charges
• Maintenance fees
• Land department fees
• Municipality taxes
• VAT

Property taxes in Dubai

In Dubai, a transfer of ownership — the adding or removal of someone from a property deed — incurs a 4% transfer fee.

You may also have to pay:

• A monthly housing fee (aka municipality tax) of 5% of the average rental value in your area. For commercial properties, property owners pay this fee; for residential properties, tenants pay this fee
• A Dubai Land Department (DLD) fee of 4%
• A mortgage registration fee of .25%
• A property registration fee of:
  • AED 2,000 (~$545) + 5% VAT for properties valued below AED 500,000 (~$136,146)
  • AED 4,000 (~$1,089) + 5% VAT for properties valued above AED 500,000 (~$136,146)
• A title/deed issuance fee of AED 250 (~$68)

Payroll taxes

There are no payroll taxes in the UAE, other than the social security tax withholdings mentioned earlier. Businesses should still establish and carefully adhere to a payroll process. If they neglect to do so, they may incur fines and penalties.

VAT

For many years, the UAE did not have a value-added tax (VAT)—the tax added to the sale of most goods and services. In January 2018, the country implemented a 5% VAT.

There are a few exceptions to this tax, however — including:

• Goods & services exported outside of GCC countries
• International transportation
• Most residential real estate
• Certain healthcare, educational, & financial services

UAE-registered businesses whose income exceeds AED 375,000 (~$102,110) must register for, charge, and submit VAT returns on either a quarterly or monthly basis.

Wealth, gift, & inheritance taxes in the UAE

(The trend continues!) There are no wealth, gift, or inheritance taxes in the UAE.

US tax obligations for American expats in the UAE

US citizens and permanent residents living and working in the UAE — and any other foreign country — must file a federal tax return if their income exceeds the minimum reporting threshold.

Common tax benefits available for expats in the UAE

Fortunately, there are multiple tax provisions that American expats can leverage to mitigate their tax liability. With the right strategy, living abroad as a US expat may even be more financially beneficial than living in the US.

A few common tax provisions expats leverage include the:

Foreign Tax Credit

The FTC provides Americans with dollar-for-dollar tax credits based on foreign income taxes. Any taxes that are legal, based on income, made out in the taxpayer’s name, and paid are eligible for the FTC. You can even receive excess credits to apply to your US tax bill in the future (up to 10 years). 

Foreign Earned Income Exclusion 

The FEIE allows Americans abroad to exclude a portion of their foreign-earned income from taxation. For tax year 2023, the limit is $120,000; for tax year 2024, it increases to $126,500. To qualify, you must meet one of two tests:

Physical Presence Test

Those who stay out of the US for 330 days in any 365-day period meet the Physical Presence Test.

Bona Fide Residence Test

Those who are officially residents of another country for one or more calendar years and can prove it through documents like residency cards, rental contracts, utility bills, etc. meet the Bona Fide Residence Test.

Child Tax Credit

The CTC offers eligible US taxpayers a partially refundable tax credit of up to $2,000 per qualifying child.

Reporting obligations for US expats in the UAE

Living abroad may add to or change Americans’ reporting obligations. Two of the most common reports US expats have to file include:

The Foreign Bank Account Report

The FBAR is used by Americans with over $10,000 across foreign financial accounts who must disclose these assets on FinCEN Report 114. 

Statement of Specified Foreign Financial Assets

The Form 8938 is for Americans abroad whose foreign assets exceed $200,000 by the last day of the tax year — or $300,000 at any point in the year, so they must file Form 8938. Thresholds start at just $50,000 for those who live in the US.

Catch up on your US taxes with the Streamlined Procedure

Were you unaware of your tax obligations as a US expat?

Don’t panic — there’s an IRS amnesty program created exactly for people in your situation. The Streamlined Procedure (SLP) can help you catch up without additional fines or penalties.

You need only file your last three past-due tax returns and last six FBARs, pay any outstanding taxes, and certify that your previous non-compliance was non-willful.

Realize your full financial potential by partnering with US expat tax experts

Living in a country that offers low (and for many residents, no) income taxes like the UAE can be a financial boon for American expats. However, this is only true if they strategically address their US tax obligations as well. 

References:

1. United Arab Emirates – Individual – Residence
2. Navigating the new year: Freelancers, small businesses and the corporate tax law
3. United Arab Emirates – Corporate – Taxes on corporate income
4. Federal Tax Authority issues new Decision on specified timeframes for Corporate Tax registration
5. United Arab Emirates – Corporate – Tax credits and incentives
6. United Arab Emirates – Corporate – Other taxes
7. A Complete Guide of Taxes and Fees For Property Purchases in UAE
8. FAQ – Is There Any Tax When Buying Property in Dubai
9. United Arab Emirates – Corporate – Other taxes