Dubai has become a top destination for expats, especially Americans. The UAE offers tax-free salaries, numerous business opportunities and lifestyle benefits that are hard to beat. However, many people forget that as a US citizen living abroad, they still have to file their US taxes. This article will provide you with a complete guide to US taxes for expats in Dubai so that you can remain tax compliant and enjoy the UAE lifestyle.
There are several things you need to keep in mind if you are a US expat in Dubai or any of the other emirates within the United Arab Emirates. While the UAE does not impose income taxes, American expats are required to pay US expat taxes if their earnings exceed certain thresholds. The US also requires that individuals report their worldwide income no matter where they live or work, so you are never out of compliance when it comes to your filing requirements as an American expat.
In addition to submitting a US federal income tax return, American expats in Dubai must also submit a FATCA report if they own any non-US financial assets that are worth more than certain thresholds. The thresholds are set by the IRS and depend on your filing status, whether you qualify for the Foreign Earned Income Exclusion or the Foreign Tax Credit, and other factors. You are required to file the FACTA report with your Form 1040, so it is important that you meet the filing deadline of April 15th (April 18th, 2023 for those who receive a filing extension).
Another thing to remember is that while the UAE does not impose property taxes, there are other fees associated with owning residential real estate in the UAE. These include registration fees, service charges, maintenance fees and municipality taxes, which vary by emirate. These fees are not included in the purchase price of your property and should be considered when calculating the total cost of ownership.
As an expat, you should understand the impact of these fees on your tax situation before making any real estate purchases in the UAE. Ultimately, it is best to work with an experienced, US expat tax advisor before purchasing any property in the UAE or anywhere else abroad.
Despite the low taxes in the UAE, there are still a number of US expats who fail to remain tax compliant. Oftentimes, this is because they are unaware of their US filing obligations or think that their international experience will shield them from the US tax code.
This is not the case. As a US expat, you are required to file a FTB return if your gross income is more than the filing threshold. The complexities of the US tax code mean that it is vital that you hire an experienced, professional advisor to help you stay compliant and ensure that you are getting the most out of your UAE expat experience. Brittany Lally, Managing CPA at Bright!Tax, specializes in US expat taxation. She works with clients around the world, including in Dubai, to ensure that they are filing their returns properly and that they are not missing out on any deductions or credits they may be entitled to. Contact us today for a free consultation.