US Expat Tax in Dubai – A Comprehensive Guide

The United Arab Emirates (UAE) is home to a large number of US expats. It is one of the most popular places in the world for Americans to relocate and work, largely because it doesn’t tax personal income. However, this doesn’t mean that American expats in Dubai don’t have to file a return, because they do. In fact, they need to be sure that their U.S. taxes are handled correctly.

As a rule of thumb, if you’ve lived abroad for at least 365 days, you’re considered to be a “bona fide resident” of the UAE for federal tax purposes. This is to prevent double taxation. Generally speaking, this means that you’ll only be subject to local UAE taxes on the first year that you live there. As long as you don’t spend more than 35 days back in the US during that same calendar year, your bona fide residency status should remain intact for future years.

If you meet the bona fide requirements, you’ll still be required to file a Federal tax return each year. In addition, you may be required to file State taxes depending on your individual circumstances. Fortunately, many American expats in Dubai are able to offset their federal income tax liability by taking advantage of special tax breaks and deductions that are available for US citizens living abroad. These tax benefits include the foreign earned income exclusion, the Foreign Tax Credit and more. With proper planning and quality tax preparation, your federal income tax can be minimized, and in some cases, eliminated.

You’ll also need to be mindful of any non-US US expat tax Dubai covered in details in this guide bank accounts that you have. If you have more than $10,000 in a foreign bank account, you must report this information on FinCEN Form 114, known as an FBAR. This is to avoid potential issues with the IRS that could lead to a substantial penalty.

Many Americans mistakenly believe that if they move overseas, they no longer have to pay federal income tax on their earnings. This is not true, even if you formally expatriate and relinquish your US citizenship or green card. Additionally, if you’ve failed to file a return in the past because you didn’t know that you needed to, it is important to realize that there are ways to catch up without facing penalties under the IRS’s Streamlined Procedure. This program allows you to file your last three returns and six FBARs, paying any outstanding taxes, and certifying that you’ve made good faith efforts to comply in the past. Contact an international tax CPA for help. They can walk you through the steps necessary to come into compliance with your US expat tax filings. If you’re not in compliance, it’s best to get started as soon as possible before the IRS comes calling. Having a plan is the key to avoiding unnecessary penalties and reducing your tax liability. The sooner you start, the less stress you’ll have. Contact Artio Partners today to discuss your specific situation and begin the process of filing your return.