Tax-free Dubai

Updated on February 10, 2026

Aya Takriti, an IRS Enrolled Agent with 12 years of expat tax experience, specializes in US tax preparation, tax planning and tax advice for US citizens and Green Card holders living and working in the Middle East. *Schedule a consultation with Aya today.

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Tax-free Dubai explained (2026): No income tax, VAT and 9% corporate tax

Tax-free Dubai usually means there’s no UAE personal income tax on your salary or wages. But you can still pay VAT on everyday spending, and the UAE now has a 9% corporate tax that can apply to many business profits.

Dubai can feel “tax-free” for employees, but it’s not a zero-tax environment across the board.

Tax-free Dubai explained for US expats

The UAE may not tax your employment income the way many countries do, but the US still taxes based on citizenship, not just where you live. That’s why plenty of people move to Dubai and still file with the IRS every year.

What’s truly tax-free in the UAE for most individuals?
For most employees, wages aren’t subject to UAE personal income tax. You’ll still feel tax in other ways, like VAT when you spend money, and you may run into corporate tax rules if you’re operating a business or holding certain business interests.

What does the IRS still tax if I live in Dubai?

In general, the IRS still looks at your worldwide income. That can include:

Salary earned while living in the UAE
Self-employment income, consulting income, and freelance income
Interest, dividends, and capital gains from US and non-US accounts
Rental income and other side income streams

If Dubai is tax-free locally, does that mean I won’t owe the IRS?
Not necessarily. Many US expats reduce US tax with tools like the Foreign Earned Income Exclusion (earned income) and, in some situations, the Foreign Tax Credit. But if you’re paying little or no foreign income tax in Dubai, you may have less foreign tax available to offset US tax.

What’s the catch for self-employed people?
Self-employment is where “tax-free Dubai” can feel the most misleading. Even if you owe no UAE personal income tax, US self-employment tax can still apply depending on how your work is structured.

What paperwork do US expats in Dubai commonly need to think about?
It depends on your situation, but the usual list includes:

Your annual US income tax return
Reporting foreign accounts if balances meet certain thresholds
Reporting foreign financial assets in some cases
State tax considerations if you kept strong ties to a US state

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US filing rules while living in Dubai

Even if you live in Dubai full-time and even if you don’t pay UAE income tax, In most cases, you still file a US tax return every year,

Do I really have to file Form 1040 if I live in Dubai?
Yes. The US taxes based on citizenship and Green Card status, so living abroad doesn’t automatically remove the filing requirement. Whether you actually owe US tax is a separate issue.

There are two main tools that people look at when they’re trying to make Dubai work financially.

FEIE (Foreign Earned Income Exclusion)
The FEIE can let you exclude a chunk of earned income from US income tax if you qualify under the residency rules. Earned income usually means wages or self-employment income from work you actually performed, not investment income.

Does FEIE mean I’ll owe zero to the IRS?
Not automatically. It can reduce US income tax on earned income, but it doesn’t cover everything. Investment income, capital gains, and other income types can still create US tax.

Foreign Tax Credit reality in Dubai
The Foreign Tax Credit is most helpful when you pay meaningful foreign income tax. Many people in Dubai pay little or no personal income tax, which means they might not have much foreign tax available to credit against US tax.

The biggest “tax-free Dubai” surprise

Self-employment tax, which is tied to US Social Security and Medicare. Even if you qualify for the FEIE and exclude income from US income tax, self-employment tax can still apply in many cases.

Why does self-employment matter so much in Dubai?
Because if you’re self-employed, the US may still treat you as responsible for Social Security and Medicare taxes on your net earnings. Since Dubai doesn’t usually have a personal income tax system that creates an obvious “offset,” people get surprised by how they get affected.

Does this only affect freelancers?
It’s most common for freelancers, consultants, and business owners. But it can also show up in certain setups where someone is paid in a way that doesn’t look like a normal employee payroll situation.

Why do some US expats still owe even if they’re regular employees?
A few common reasons:

They don’t qualify for the FEIE for the year, especially in a move year
They have investment income or capital gains that aren’t covered by FEIE
They don’t have foreign taxes paid that would help with a credit
They still have state tax ties back in the US
They didn’t plan for estimated payments when they needed them

Bank accounts and investments in tax-free Dubai

Living in Dubai doesn’t change one important thing: the US still wants visibility into many foreign accounts. So even if you owe little or no UAE income tax, your UAE bank accounts and investment accounts can still trigger US reporting.

When do I have to file an FBAR?
You generally file an FBAR (FinCEN Form 114) if the combined highest balance of all your non-US financial accounts goes over US$10,000 at any point during the year. It’s an aggregate test, so multiple smaller accounts can still push you over the threshold.

What is FATCA reporting for an individual?
FATCA often shows up as Form 8938 on your US tax return. It’s a separate reporting requirement for certain foreign financial assets once you cross the relevant thresholds. Not everyone who files an FBAR has to file Form 8938, but many expats end up filing both.

What kinds of accounts usually count?
Common examples include checking and savings accounts, brokerage and investment accounts, and sometimes other financial accounts depending on how they’re set up. If you have signature authority over a company account, that can matter too, even if the money isn’t “yours” in the normal sense.

What are common audit or compliance triggers for US expats in Dubai?

Reporting interest or dividends, but not reporting the account itself when required
Missing one account because it feels inactive or small, even though it counts in the total
Big swings in balances year to year with no clear explanation in the return
Mixing up gross and net amounts, especially when tax was withheld somewhere
Inconsistent personal details across forms, like name formatting or addresses, that cause extra questions later

If you run a company in tax-free Dubai

Dubai can still be a smart place to operate, but once you run a business, you’re dealing with two systems at the same time: UAE corporate rules and US owner reporting rules.

Does the UAE have corporate tax now?
Yes. The UAE has a corporate tax system, and a 9% corporate tax rate can apply to taxable profits above a threshold. The details depend on the entity and what it earns.

Are Free Zone companies automatically tax-free?
Not automatically. Some Free Zone businesses can qualify for a 0% rate on certain income if they meet specific conditions, but it’s not a “set it and forget it” situation. If a company doesn’t meet the conditions, it may be taxed under the normal corporate tax rules for the non-qualifying portion.

What do US owners need to plan for?
US reporting can be the bigger issue than UAE tax. Depending on how your Dubai company is structured, you may have extra US filings even if you don’t bring money back to the US.

Common situations that create extra reporting include:

Owning part of a foreign corporation or foreign partnership
Moving money between you and the company (loans, reimbursements, capital contributions)
The business holding foreign bank accounts, not just you personally
Keeping profits in the company instead of paying them out

Why do some US owners still owe US tax in tax-free Dubai?
Because the US has rules that can tax certain foreign business income, even when it’s earned abroad and even when it stays inside the company. The exact outcome depends on how the entity is treated for US tax purposes and what kind of income it earns.