When U.S. citizens or residents set up companies in the UAE, one of the first questions they ask is:
“If my company is in Dubai, will I still pay tax in the U.S.?”
It’s an important question — and one that deserves a clear, accurate answer.
1. The UAE Tax Framework
The UAE now applies a 9% Corporate Tax on company profits exceeding AED 375,000.
This tax is paid by the company, not by the shareholder.
There is no personal income tax in the UAE, and dividends received by individuals are not taxed locally.
So, at the UAE level, business owners are subject only to company-level taxation.
2. The U.S. Global Tax System
The United States taxes its citizens and residents on worldwide income, even if that income is earned through a foreign company.
However, this does not mean that UAE company profits are automatically taxable in the U.S.
From a U.S. perspective, the UAE company is a separate legal entity.
Its profits belong to the company until they are distributed to the shareholder as dividends.
3. When Do UAE Profits Become Taxable in the U.S.?
UAE company profits generally become taxable in the U.S. only when:
- The profits are distributed as dividends to the U.S. shareholder; or
- The company falls under specific U.S. international tax rules, such as Subpart F or GILTI (Global Intangible Low-Taxed Income), which can require U.S. shareholders to include certain types of undistributed foreign income in their U.S. tax returns.
If your UAE company earns active business income and pays 9% UAE Corporate Tax, it usually remains taxed only in the UAE until dividends are paid.
But it must still be reported to the IRS as part of your annual U.S. compliance (typically on Form 5471).
4. Structuring for Compliance and Efficiency
While complete exemption from U.S. taxation is not possible, proper structuring can minimize exposure and prevent double taxation.
Common approaches include:
- Taking a reasonable salary for active work (which may qualify for the Foreign Earned Income Exclusion if residency tests are met).
- Leaving part of the profit in the company or distributing it as dividends with full documentation.
- Coordinating UAE accounting records with a qualified U.S. expat tax adviser to ensure all forms and elections are properly filed.
The key is not avoidance, but alignment — making sure both tax systems recognize the same facts clearly.
5. The Finzoryx Perspective
At Finzoryx, we guide founders through the intersection of UAE and U.S. tax systems.
Our role is to ensure your UAE company remains compliant locally while your U.S. filings reflect the correct structure, timing, and documentation.
Clarity. Compliance. Confidence.
That’s how cross-border business should be built.
Contact us:
connect@finzoryx.com | +971-503978121