UAE-US Tax Treaty: A Guide for Claiming Tax Reliefs as a US Expat in the UAE

This makes it essential for US expats to understand the extent of their tax obligations and identify the appropriate relief mechanisms available under US domestic tax law. Effective planning is key to avoiding potential double taxation and ensuring full compliance.

This guide explains whether a UAE-US tax treaty exists and outlines the tax relief options—such as the Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC)—that may be available to US citizens living and working in the UAE.

How Do the US and UAE Tax Their Residents?

Tax rules for expats in most countries depend on residency, which is typically determined by factors such as the amount of time physically spent in a jurisdiction during a tax year, the location of one’s primary residence, and the centre of vital interests.

Under UAE law, an individual is generally considered a tax resident if they meet one of the following criteria:

• Physically present in the UAE for 183 days or more in a 12-month period;
• Present for at least 90 days, and either has a UAE residence permit or has personal or economic ties in the UAE.

These rules are outlined under Cabinet Decision No. 85 of 2022 and are used to determine eligibility for a UAE Tax Residency Certificate.

However, the US does not rely on residency status when determining your tax liability. Instead, you must report your worldwide income on your US tax return as long as you are an American citizen. Accordingly, even if you’re considered a tax resident in the UAE, you’re generally liable for US tax on income and gains earned within the UAE, assessed at your marginal tax rate.

While the US is a higher-tax jurisdiction, the UAE employs a zero-tax policy on most types of income, including those derived from the following sources:

• Employment
• Rent
• Capital gains
• Inheritance
• Interest
• Dividends

As a result, US expats living and working in the Emirates are effectively subject only to US taxation on their UAE-sourced income.

One of the few types of tax you may be liable for in the UAE is corporate tax. From 1 January 2025, businesses in the UAE generating annual profits exceeding AED 375,000 (approx. US $102,000) are subject to a 9% federal corporate tax. Additionally, under OECD Pillar Two rules, large multinational companies may face a 15% minimum domestic top-up tax..

Under specific circumstances, your company may be liable for a higher corporate tax rate as follows:

1. A rate of up to 55% if your company is involved in oil and gas production
2. A flat rate of 20% if you operate a branch of a foreign bank

Is There a UAE-US Double Taxation Treaty?

There is currently no double tax treaty between the UAE and the US.

Double taxation agreements (DTAs) are designed to divide taxing rights on various types of income between two jurisdictions and to protect their tax residents from being taxed on the same income by both contracting states.

As the UAE does not levy taxes on most types of income, US expats living in the Emirates generally aren’t exposed to the risk of double taxation. Consequently, the presence of a DTA between the two countries would primarily benefit business owners liable for corporate tax in both the US and the UAE.

How Can US Expats in the UAE Avoid Double Taxation?

Although there is no double taxation agreement between the US and the UAE, the IRS provides US expats with two general tax relief methods for reducing their taxable income in the US:

What Is a Foreign Tax Credit?

If both jurisdictions impose tax on the same income, the foreign tax credit (FTC) method allows you to offset the taxes paid or accrued in a foreign jurisdiction against your US tax liability. For instance, If you paid $3,000 in taxes in a foreign country, you may be able to claim up to $3,000 as a Foreign Tax Credit, subject to IRS calculation rules.

The amount of tax credit available is determined by your worldwide income and the taxes paid to a foreign jurisdiction. Specifically, the maximum credit is calculated by dividing your foreign-sourced taxable income by your total taxable income and multiplying the result by your total US tax liability.

In case the taxes you’ve paid abroad exceed the maximum allowable FTC, the excess amount may be rolled forward to reduce your future US tax liability.

If your foreign taxes exceed the limit allowable for the current year, you may carry back the unused credit one year or carry it forward up to 10 years, as per IRS guidelines.

Who Is Eligible for a Foreign Tax Credit?

You qualify for an FTC if you meet the following requirements:

1. You are a US citizen
2. You earn income from foreign sources
3. You have paid income tax on foreign-earned income to a foreign government

If you meet all of the above criteria, you can file Form 1116 to apply for an FTC. The form will require you to provide information regarding the following:

• Taxable income earned outside of the US
• The amount of foreign taxes paid or accrued
• Your US taxable income

What Is a Foreign Earned Income Exclusion (FEIE)?

Foreign Earned Income Exclusion (FEIE) allows US expats to deduct specific types of foreign-earned income from their US tax return. For the 2025 tax year, the maximum FEIE amount is US $130,000 per qualifying individual.

The following table outlines the qualifying and non-qualifying income for FEIE purposes:

Besides the FEIE, you can also apply for the foreign housing exclusion or deduction. This relief mechanism excludes the amount your employer paid for your housing in the UAE from your tax bill in the US.

Who Qualifies for the Foreign Earned Income Exclusion?

You’re eligible for the FEIE if you earn foreign income and have a tax home in a foreign country.

Your tax home is your primary place of business or employment. This location doesn’t have to be your residence or domicile for tax purposes. In the absence of a primary place of business, your tax home is the place where you regularly live.

Besides the two main criteria, you must also be a US citizen who fulfils one of the following requirements:

1. You pass the bona fide residence test, meaning you’re a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year. This is a subjective test based on factors such as your intention to stay in the foreign country, the length of your stay, and your connection to the country.
2. You have been physically present in a foreign country for 330 days or more during a 12-month period.
3. You are a US resident alien (a US resident who was born outside of the US and isn’t a US citizen), who is a citizen or national of a foreign country that has an income tax treaty with the US. You must also have maintained bona fide residency in the foreign country for a continuous period that spans a full tax year.

The third requirement doesn’t apply to US expats in the UAE due to the absence of a tax treaty between the two jurisdictions. However, if you meet one of the other two requirements, you may apply for FEIE by filing Form 2555. To complete the application, you must provide information including the following:

• Your employer’s personal details, like their name and address
• Details regarding the bona fide test or the physical presence test (if applicable)
• The foreign earned income for the tax year in which you claim the FEIE and/or the foreign housing exclusion

You’re allowed to claim both the foreign tax credit and the foreign earned income exclusion, but not on the same income. Expert financial advisers, like those available at Titan Wealth International, can help you determine the tax relief you qualify for as a US expat in the UAE. They can also guide you in selecting the most suitable deduction strategy to optimise tax planning based on your specific circumstances and goals.

Are Any Other Tax Reduction Methods Available to US Expats in the UAE?

While there is currently no double taxation agreement (DTA) between the UAE and the United States, US expats may benefit from administrative mechanisms designed to ease compliance burdens under the Foreign Account Tax Compliance Act (FATCA).

FATCA requires foreign financial institutions (FFIs) to report information on accounts held by US persons to the Internal Revenue Service (IRS).

Non-compliant institutions are subject to a 30% withholding tax on certain US-sourced payments, including dividends, interest, and other specified income. This withholding applies to the institution—not the individual account holder—but it can affect service availability for US expats.

To support FATCA compliance, the UAE and the United States have entered into a Model 1 Intergovernmental Agreement (IGA). Under this framework, UAE-based FFIs report account information to the UAE Federal Tax Authority, which then transmits the data to the IRS.

This indirect reporting route encourages greater institutional compliance and helps maintain access to banking and investment services for US citizens living in the UAE.

It is important to note that FATCA and the IGA do not eliminate or reduce US tax obligations. US citizens remain subject to worldwide taxation and must continue to file annual income tax returns and financial disclosures with the IRS.

In addition, there is currently no totalisation agreement between the United States and the UAE. This means that US expats working in the Emirates—especially those who are self-employed—may remain liable for US Social Security and Medicare taxes, even if they are not required to pay equivalent contributions under UAE law.

Beyond income reporting, US citizens and green card holders must also comply with additional foreign asset disclosure requirements:

• FBAR (FinCEN Form 114): Required if the aggregate value of all foreign financial accounts exceeds US $10,000 at any time during the calendar year. This includes bank accounts, brokerage accounts, and certain pension plans held outside the United States.
• FATCA (Form 8938): Required for individuals whose specified foreign financial assets exceed US $200,000 (single filers) or US $400,000 (joint filers) at year-end—or higher thresholds during the year—while living abroad.

Failure to file these forms can result in substantial civil penalties, even in cases where no additional US tax is due. These disclosure obligations apply regardless of whether the underlying assets generate taxable income.