Expat tax · United Arab Emirates
The UAE charges no income tax on salaries, so there is no credit to cut your US expat taxes. Dubai residents rely on two exclusions instead.
US tax reaches citizens and green card holders on income earned anywhere, the UAE included. In Dubai, a salaried American who meets the exclusion tests for all of 2026 can exclude up to $168,810 of pay, housing included. Salary above that, and all investment income, is taxed at US rates.
Updated · Sources
Working in Dubai, tax year 2026
- 0%
- is the UAE’s income tax on salaries, dividends, interest and gains, and there is no individual return to file.
- $132,900
- is the 2026 foreign earned income exclusion, the most pay for work abroad you can exclude from US income tax.
- $57,174
- is Dubai’s cap on housing costs, and the part above a $21,264 base is excluded too.
The US has no income tax treaty with the UAE, so no treaty article changes these rules.
Which US rules follow you to the UAE?
Your US citizenship or green card keeps you filing
You file a US return once your gross income meets the IRS threshold, and pay you exclude counts toward it. The exclusions can be claimed only on a filed return, so a zero tax bill does not excuse one. A freelancer with $400 of net self-employment earnings must file even with no other income.
Your tax home is in the UAE, and you pass one of two tests
The exclusions need a foreign tax home, meaning your main place of work, plus a residence or presence test. Under the physical presence test, you spend at least 330 full days in foreign countries within 12 consecutive months. The bona fide residence test is open to citizens and some green card holders. You pass it by living in the UAE for a full tax year, and temporary trips away do not break it.
You work for an American employer, or for yourself
US Social Security and Medicare tax can follow you to Dubai. The US and UAE have no totalization agreement, the kind of pact that decides which country’s system covers a worker. An American employer generally keeps you in both. If you work for yourself, self-employment tax applies to your net profit, including the part excluded from income tax.
Your UAE and other foreign accounts top $10,000
The FBAR, FinCEN Form 114, reports your foreign accounts to the US Treasury. You file it once the highest balances of all your foreign accounts in the year add up to more than $10,000. Every foreign account then goes on the report, UAE bank and broker accounts included. Larger holdings can also bring Form 8938, whose thresholds rise for people living abroad.
The UAE can treat you as tax resident after 183 days in 12 months, mainly to issue its residence certificates. The IRS applies its own tests for the exclusions.
Both exclusions still leave $18,192 of US tax on a $250,000 Dubai salary.
The credit alone
$51,304
This is the US tax on $233,900 of taxable income, after the $16,100 standard deduction. Form 1116 has nothing to credit, because the UAE took no tax from the salary.
The exclusion alone
$26,810
Form 2555 removes $132,900 of pay. The remaining $101,000 of taxable income starts in the 24% bracket and climbs into 32%.
The exclusion plus Dubai housing
$18,192
The housing exclusion takes off $35,910 more, which is $57,174 of capped costs less the $21,264 base. The $65,090 of taxable income left is taxed from the 24% bracket up.
Each row is 2026 US income tax for a single filer, from the rates in Rev. Proc. 2025-32. The $60,000 of housing costs is capped at Dubai’s $57,174 under Notice 2026-25. Under the stacking rule, the income left over takes the brackets it would reach if the excluded pay still counted. The American is assumed to meet the exclusion’s tests for the whole year.
In 2026 the UAE leaves salaries and investments untaxed, while the US taxes both.
| UAE | US | |
|---|---|---|
| A salary | Not taxed | 24% to 37% On a single filer’s pay above the full exclusion |
| Dividends, interest and gains | Not taxed | Taxed No exclusion applies |
| Freelance profit | 9% above AED 375,000 Once turnover tops AED 1,000,000. For 2026, Small Business Relief can remove it on revenue up to AED 3,000,000. | Excludable from income tax Self-employment tax still applies |
| Spending | 5% VAT Plus excise tax on some goods | No credit for either The credit covers income taxes only |
| Individual return | None A Corporate Tax return if business turnover tops AED 1,000,000 | Form 1040 by June 15 Interest still starts April 15 |
Salary never counts as business income for UAE Corporate Tax. Income from your own investments or rental property counts only when it needs a UAE licence or is run as a commercial business.
What can still cost you US tax when the UAE takes nothing from your pay?
An end-of-service gratuity
A gratuity paid in 2026 can generally be excluded only for work done in 2025 and 2026. A UAE private-sector job generally ends with this end-of-service payment, which is pay for past work. The exclusion reaches pay only if you receive it by the end of the year after the work. Even those parts fit only in the room left under each year’s cap.
Using Dubai’s housing cap outside Dubai
Notice 2026-25 sets housing caps city by city, and the Dubai figure applies only in Dubai. Abu Dhabi has its own, lower cap, and a UAE city the notice leaves out gets the standard $39,870.
UAE funds and ETFs
Owning a mutual fund or ETF based in the UAE usually means owning a passive foreign investment company, or PFIC. Its income and gains then fall under separate US rules. Only a foreign fund can be a PFIC, so a fund organized in the US is never one.
Moving on to a country with higher tax
After a move to a country with high income tax, the credit may leave less US tax than the exclusion. The IRS treats switching to it as revoking the exclusion election. You then cannot claim the exclusion again for 5 years without IRS consent. Without a switch, the election carries into later years. Each year’s return still claims it on Form 2555, or the IRS may treat the gap as a revocation too.
We file the US return an American in Dubai still owes.
Valim is a US CPA firm, so for Americans in Dubai we prepare the US return and FBAR, never a UAE filing.
- We claim both exclusions on Form 2555, using your city’s housing cap. We file your FBAR and any Form 8938, and your quote counts each UAE account and foreign fund.
- For freelancers, we figure US self-employment tax, and work alongside any UAE accountant who files your Corporate Tax return.
- We plan the US tax on an end-of-service gratuity, or on a move to a higher-tax country.
- We set the US estimated payments due on income above the exclusions.
- We respond to IRS and state notices on returns we prepared, such as a challenge to your exclusion, as part of the fee.
- Individual return
- from $195
- Business return
- from $495
We quote a flat fee before work starts. We do not bill hourly.
Dubai’s zero income tax raises five US tax questions.
Do US citizens living in Dubai pay taxes?
Yes, US citizens in Dubai owe US tax on their worldwide income, though the UAE levies no income tax on them. Most employees cut the US tax with the foreign earned income exclusion and the housing exclusion. Anything above those limits is taxed at US rates, and so is investment income. They still file a return once gross income meets the filing threshold, even if the exclusions leave nothing to pay.
Does the US have a tax treaty with Dubai?
No, the US has no income tax treaty with the United Arab Emirates, and Dubai is one of its emirates. The two countries have no totalization agreement on Social Security either. For a citizen, the gap usually matters little, since a treaty’s saving clause lets the US keep taxing its citizens. Relief comes from US law alone: the two exclusions, plus the foreign tax credit for any tax paid to another country.
Is Dubai a tax haven for foreigners?
The UAE, Dubai included, charges foreigners no personal income tax, but Americans still owe US tax on worldwide income wherever they live. Low local tax works the same way in Singapore: most investment gains go untaxed there, but not on the US return. The UAE does charge 5% VAT, and a 9% corporate tax on business profit above AED 375,000. A freelancer or sole proprietor pays that tax only once business turnover tops AED 1,000,000 in a calendar year. A company they own is a separate taxpayer under the rules for companies.
How much of a Dubai salary can I exclude from US tax in 2026?
An employee who meets the exclusion tests for all of 2026 can exclude up to $168,810 of a Dubai salary. The 2026 foreign earned income exclusion is $132,900, and Dubai housing adds $35,910, the costs between the $21,264 base and Dubai’s $57,174 cap. A single filer’s $16,100 standard deduction then covers more, so a salary up to $184,910 can owe no US income tax. That holds only with no other income and at least $57,174 of qualifying housing costs.
Does the UAE tax my US pension or Social Security?
No, the UAE levies no income tax on individuals, so it taxes neither. The US taxes both under its usual rules, since no treaty between the two countries changes them. The foreign earned income exclusion never covers pensions or Social Security. With no UAE tax paid, no credit applies either. Americans in Mexico get the same result on Social Security by treaty, which leaves US benefits to the US alone.
Sources
- UAE Government portal, Taxation
- UAE Cabinet Decision No. 49 of 2023, Specifying the Categories of Businesses or Business Activities Conducted by a Resident or Non-Resident Natural Person that are Subject to Corporate Tax
- UAE Federal Tax Authority, Taxation of Natural Persons under the Corporate Tax Law (CTGTNP1, November 2023)
- UAE Ministerial Decision No. 73 of 2023 on Small Business Relief
- UAE Cabinet Decision No. 85 of 2022, Determination of Tax Residency
- IRS, United States income tax treaties, A to Z
- Social Security Administration, US international social security agreements
- 26 U.S.C. § 911, Citizens or residents of the United States living abroad
- IRS, Rev. Proc. 2025-32 (2026 inflation adjustments)
- IRS, Notice 2026-25, Determination of housing cost amounts eligible for exclusion or deduction for 2026
- 26 U.S.C. § 901, Taxes of foreign countries and of possessions of United States
- 26 U.S.C. § 1402, Definitions (net earnings from self-employment)
- 26 U.S.C. § 1297, Passive foreign investment company
- IRS, Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
- 31 C.F.R. § 1010.350, Reports of foreign financial accounts
- FinCEN, BSA Electronic Filing Requirements for the FBAR (FinCEN Form 114)
- IRS, Comparison of Form 8938 and FBAR requirements
Reviewed and updated September 2026. General information, not advice for your situation.