The United Arab Emirates (UAE) is a fascinating country with much to offer American expats in terms of culture, lifestyle, and opportunity. US expats in UAE face some complex tax issues though and are not always aware of their filing requirements.

Our article on US expat tax in UAE aims to highlight some of the key things to keep in mind when preparing and filing your U.S. expat return from Dubai or elsewhere in the country. We also touch upon some preferential tax treatments such as the Foreign Earned Income Exclusion, Foreign Housing Exclusion, and other deductions/credits.

In general, Americans living abroad are required to consider both their home and host country taxes each year. In the case of UAE, this usually means filing a US expat tax return. However, because the UAE does not tax income, some American expats in Dubai will only need to file a return on the US side as they won’t be paying any local taxes.

If your UAE salary is above a certain threshold you may be able to exclude some or all of it from US taxation using the Foreign Earned Income Exclusion. To qualify for this benefit you must have been outside the US for at least 12 months and meet the Physical Presence test. You must also be able to show that you paid foreign income taxes on the qualifying earnings.

The UAE and the US have entered into a number of double taxation treaties (DTT) or Totalization Agreements. These agreements help to avoid double taxation of income earned in the UAE and the USA. However, the DTTs do not apply to all types of income. For example, the UAE does not have a DTT with the US regarding interest income earned in the country.

A common mistake that many Americans make when working as an expat in the UAE is believing that since there is no income tax in the country that their US taxes will be zero. This could not be more incorrect. Regardless of how low or high your taxes are, you must file a return and meet all other filing deadlines such as FBAR (Foreign Bank Account Reporting) Form 114.

If you have not filed your US tax returns in the past due to non-compliance with filing requirements, there is an amnesty program available called Streamlined Procedure. Under this program, you can typically get back on track by filing your last three returns and six FBARs in one go.

Randall Brody is an IRS Licensed Enrolled Agent, which means he has met the stringent education, experience, and ethics requirements set by the IRS to represent taxpayers before the agency on audits, collections, and appeals. He has vast experience helping Americans living abroad, including in the UAE, with their expat tax returns. Contact him today to discuss your situation and find out how he can help you. Getting the right advice in the early stages of your move to the UAE can save you time, money, and stress.