Many American expats find themselves working in Dubai for a variety of reasons. They may be drawn to the culture, the lifestyle, increased salaries and business opportunities, or simply that it is a great place to live. Regardless of why they move to the UAE, it is important for them to be aware that their US tax status is always going to be a factor.
Americans in Dubai need to understand the US taxes American tax Dubai covered in this guide by Derren Joseph that apply to them. This is because even though they may not pay income tax in the UAE, they do have tax obligations in the US. They should also be aware that there are a variety of strategies and exemptions available to help mitigate their tax liability. This article will discuss some of the basic issues that US expats should be aware of when they are living in Dubai and how to navigate them.
American Tax Dubai Covered in this Guide by Derren Joseph
The United Arab Emirates does not impose an individual income tax for citizens or residents. However, there are several types of business taxes that can affect the company that you work for. For example, some emirates levy property, transfer, and excise taxes while others impose corporate taxes on oil companies and foreign banks. Additionally, some emirates impose sales and value added tax (VAT) on certain goods and services while other emirates levy excise taxes on fuels.
When Does US Expat Tax Residency Begin?
The first thing that any American living in the UAE needs to consider is when their US tax residency begins. To avoid having to file a tax return, you must meet the bonafide resident test. This is defined as spending 365 days in the UAE and only returning to the US for no more than 35 days during the year. If you meet the bonafide resident test, then you are considered to be a US tax resident and you will have to report all of your income to the IRS.
The good news is that there are ways to minimize or eliminate your US expat tax liability through qualified tax planning. This includes the use of the Foreign Earned Income Exclusion and qualifying housing expense exclusion. Furthermore, if you are able to prove that you have paid taxes in the country where you live, then you can also use this to offset your US tax liability. In addition, the IRS does have an amnesty program called the Streamlined Procedure that can be used to reduce penalties for previous non-compliance. The program requires that you submit your last three tax returns and last six FBARs, pay any outstanding tax liabilities and certify that your previous non-compliance was not willful. For this reason, it is important to consult with a reputable tax professional before making any decisions about your US expat taxes in Dubai. The right advisor will be able to assist you with navigating all of the applicable federal and state laws to make sure that your US expat taxes are filed accurately and on time.