American Tax in Dubai: A Guide for US Expats

This guide explores American tax in Dubai, detailing the dual filing responsibilities faced by US expats. We explain UAE corporate and value-added tax rules, outline IRS compliance requirements, and assess the impact of international reporting obligations such as FBAR and FATCA.

We also cover available reliefs—including the Foreign Earned Income Exclusion (FEIE)—and options under the IRS amnesty programmes for those behind on filing. Finally, we evaluate whether moving to Dubai is an efficient strategy for long-term cross-border tax planning.

How Much Tax Do You Pay in Dubai as a US Expat?

The UAE is considered a highly tax-efficient jurisdiction, as it does not levy taxes on most categories of income for either residents or non-residents, including US expats. The UAE imposes no tax on employment income, foreign income, inheritance, and capital gains from various sources.

Meanwhile, US expats and business owners in Dubai may be liable for the following charges in the UAE:

1. Corporate tax
2. Value-added tax (VAT)
3. Property fees

Corporate Tax

As a business owner in Dubai, you may be subject to corporate tax at different rates based on your specific circumstances:

1. A 9% rate if your company earns over AED 375,000 per year. Freelancers and self-employed individuals are subject to the same tax rate, provided their earnings exceed AED 1 million annually. From 1 January 2025, the UAE introduced a 15% Domestic Minimum Top-up Tax (DMTT), applicable to multinational enterprises with global revenues exceeding €750 million. This aligns with OECD Pillar Two requirements and ensures a minimum effective tax rate.
2. Separate emirate-level taxation applies to oil and gas exploration and production, typically under concession agreements with bespoke tax rates. These are outside the scope of the standard 9% UAE federal corporate tax regime.
3. A flat 20% rate if you operate a branch of a foreign bank

If you maintain a business in a UAE free zone that is considered a qualifying free zone person (QFZP), and it generates annual income of over AED 375,000, only its non-qualifying income will be subject to the 9% corporate tax rate. Qualifying income, by contrast, will remain exempt from corporate taxation. Qualifying income includes the following:

• Transactions with other free zone persons, provided they are the beneficial recipients of the funds and the transactions are not related to excluded activities, such as banking, insurance, or investment management.
• Transactions linked to qualifying activities such as the manufacturing of goods and materials, fund management services, or logistics services.
• Income generated from the ownership or exploitation of qualifying intellectual property.

Corporate tax is generally levied on businesses established in the UAE, but it may also apply to their foreign profits generated by a branch or an office in another country.

Value-Added Tax (VAT)

US expats who operate a business in Dubai may be liable for value-added tax (VAT) on the goods and services they provide. Although VAT is a tax imposed on businesses, the cost is generally passed on to consumers.

If your annual taxable supplies exceed AED 375,000, you are required to register for VAT and pay a 5% tax. You’re allowed to deregister if your supply costs fall below AED 375,000 and remain at that level. Registering for VAT is optional for businesses with taxable supplies between AED 187,500 and 375,000 per year.

VAT doesn’t apply to all products and services. For instance, the tax isn’t levied on the following:

• Education and healthcare services
• International transportation
• Investment metals like gold and silver
• New residential properties
• Goods and services exported outside of the Gulf Cooperation Council (GCC) countries

Property Fees

While there is no property or rental income tax in Dubai, you may be liable for specific property fees. For instance, you may have to pay a property registration fee of 4% of the property’s sale value and a 4% transfer fee when the property is transferred to you.

Dubai also has annual property maintenance fees ranging from $15 to $60 per square metre, which you must pay a year in advance. If you have a mortgage, you may also be charged a fee of 0.25% of the mortgage amount.

Are US Expats in Dubai Liable for American Tax?

All American citizens, including expats living and working in Dubai, are liable for US tax on their worldwide income unless specific tax exemptions apply. Your worldwide income includes earnings from rent, employment, investments, pensions, and royalties.

Even if you live in Dubai permanently, you’re required to file a US tax return if you meet the minimum income threshold.

However, you may be eligible to claim the Foreign Earned Income Exclusion (FEIE), which allows qualifying expats to exclude up to $130,000 of foreign earned income in 2025 from US taxation. This can significantly reduce or even eliminate your US tax liability if you meet the physical presence or bona fide residence test.

The minimum filing threshold depends on your age and filing status, as shown below:

If you earn an income from self-employment and your net earnings are over $400, you must also file a US tax return.

Which Tax Returns Do US Expats in Dubai Have To File?

Unless you renounce your US citizenship, you are required to file at least one US tax return annually if you meet the minimum income threshold, regardless of how long you’ve lived in Dubai and whether you’ve obtained UAE tax residency. Depending on your income and assets, you may have to file some or all of the following IRS tax forms:

1. Form 1040: This is an individual income tax return that all US citizens and expats must file. The filing due date is 15 April, but expats are eligible for an automatic extension until 15 June. You may also request a further extension until 15 October.
2. Form 8938: Better known as FATCA, this form is used for filing taxes on financial assets you own outside of the US above specific thresholds. For instance, if you’re a single taxpayer living abroad, you must file a FATCA report if you own over $200,000 in foreign financial assets on the last day of the tax year or $300,000 at any time throughout the year. Foreign financial assets include foreign investment accounts and interest in foreign bank accounts and entities.
3. FinCEN Form 114: You are required to file this form, often referred to as an FBAR, if you hold over $10,000 in one or several bank accounts outside of the US. You can complete and submit the form online through the BSA E-Filing System by 15 April, but there’s also an automatic extension until 15 October.

If you willfully file a US tax return after the original or extended due date, you’ll be subject to a 5% penalty on the taxes due for each month (or part of a month), up to a rate of 25% of the tax owed. If you fail to pay the penalty, you’ll also be liable for an additional 0.5% charge per month (or part of a month) on your unpaid taxes, up to a maximum of 25%.

What Is the IRS Amnesty Program in Dubai?

The IRS tax amnesty programs may provide relief from penalties if you fail to pay your US taxes due to non-willful conduct while living overseas. Failure to file a return due to non-willful conduct means that the omission resulted from negligence or inadvertence, often stemming from a misunderstanding of legal requirements.

Tax amnesty programs encourage taxpayers to voluntarily disclose and file unpaid taxes to reduce tax liability and avoid legal consequences like criminal prosecution for tax evasion. They typically offer a waiver of penalties and interest and apply to both personal and business taxes.

Which Types of US Tax Amnesty Programs Are Available to Expats?

There are several types of IRS amnesty programs, but the most beneficial ones for US expats include the following:

By applying for one of these programs, you can fully avoid penalties for late tax returns. However, the voluntary disclosure program includes a willful FBAR penalty, which is either $100,000 or 50% of non-disclosed accounts, and a 75% civil fraud penalty for the tax year with the highest tax liability, although the penalties may be reduced.

Which Documents Do You Need for a US Tax Amnesty Application in Dubai?

Depending on the program in question, you must gather and submit the following documentation and returns:

1. Streamlined filing compliance procedure: Submit tax returns for the prior three years, FBARs for the previous six years, and a written statement proving your non-compliance wasn’t willful.
2. Delinquent FBAR submission procedure: Provide late FBARs for up to six prior years and an explanation for late filing.
3. Relief procedure for certain former citizens: Deliver tax returns for the previous five years and the year of US citizenship renunciation.
4. Voluntary disclosure program: File tax returns and FBARs for the previous six years.

How To Apply for a Streamlined Tax Amnesty?

The IRS offers two separate streamlined procedures: one for US residents (Streamlined Domestic Offshore Procedures) and one for non-residents living abroad (Streamlined Foreign Offshore Procedures).

Only the latter waives penalties entirely. Domestic applicants may still face a 5% penalty on the highest year-end value of foreign financial assets.

The streamlined tax amnesty is the most advantageous program for expats who retain US citizenship, as it covers both income tax returns and FBAR filings without imposing penalties. If you meet the program’s criteria, you can apply by gathering the required documentation and submitting the following forms:

• Form 1040: Use the individual income tax return to file taxes for the previous three years.
• FinCEN Form 114: If your foreign financial accounts exceeded $10,000 in any of the past six years, file FBARs for the last six years.
• Form 14653: This form is the certification of non-willfulness that you must submit to prove your late filing wasn’t intentional.
• Form 2555 or 1116: If you qualify for tax exclusions, you can use Form 2555 to claim a foreign earned income exclusion and Form 1116 to claim a foreign tax credit.

Speaking to a financial adviser, like those available at Titan Wealth International, can assist you in streamlining the tax filing process, claiming the applicable deductions, and minimising tax liability.

Does the UAE Have a Tax Treaty With the US?

While there is no tax treaty between the US and the UAE to prevent double taxation, American expats are generally taxed only by the US on their worldwide income. As a result, the only risk of double taxation may arise in relation to the corporate tax, which US expats may have to pay in both countries.

Additionally, there is no totalisation agreement between the US and the UAE. This means US expats remain liable for US Social Security and Medicare taxes on self-employment income, and do not contribute to any UAE social security system.

US expats in Dubai may claim the Foreign Earned Income Exclusion (FEIE). This tax relief mechanism allows you to exclude specific types of foreign income (up to $130,000 in 2025) from US taxation. FEIE applies only to earned income, such as wages and salaries, while passive income, like pensions, dividends, and capital gains, does not qualify for exclusion.

US expats who meet the eligibility criteria may also claim the Foreign Housing Exclusion or Deduction to reduce their taxable income further. This covers qualified housing expenses in high-cost locations like Dubai, up to IRS-set limits.To qualify for FEIE, you must meet specific requirements, such as being physically present outside the US for at least 330 full days in a 12-month period or proving that you’re a bona fide resident of a foreign country.

Is Moving to Dubai for Tax Reasons Worth It?

Moving to Dubai for tax reasons may be a prudent financial decision, depending on your personal circumstances. You may consider moving to Dubai if the following applies to you:

• You want to live and retire in a country with low or zero tax
• You plan to invest in real estate and generate high rental returns
• You wish to grow your wealth and retirement savings in a tax-efficient manner

However, before deciding, it’s advisable to account for Dubai’s high cost of living, especially regarding rent, as the average monthly rent in Dubai is AED 6,400 (around $1,750).

If you’re planning to work in Dubai until retirement, consider that the UAE’s national pension system is not available to expats. In addition, rolling over your 401(k) or another US retirement plan to the UAE is not possible, and there are no equivalent tax-advantaged schemes in the country.