US-UAE tax treaty: there isn't one. Here is what applies

Search for US tax rates for UAE residents and you will find tables that look official, complete with withholding percentages. They are not real. There is no income tax treaty between the United States and the United Arab Emirates, so those "treaty rates" don't exist.

This matters if you live in Dubai or Abu Dhabi and hold US shares, own a US LLC, or are thinking about buying property in Florida. Without a treaty, US domestic law applies to you as it would to any other non-resident, with no reductions and no tie-breaker rules.

The good news is that the domestic rules are workable once you know them. Some income is fully exempt, some is taxed at a flat 30%, and some depends on whether you run a business in the US. Separately, there is an estate tax threshold that catches far more UAE residents than they expect. This guide sets out what actually applies, the forms you can't skip, and the questions to bring to an adviser.

Is there a US-UAE tax treaty?

No. The IRS publishes a list called "United States Income Tax Treaties A to Z". The version last updated on 3 January 2026, checked on 16 October 2026, does not include the UAE. The UAE is also absent from the separate IRS list of estate and gift tax treaties.

A treaty would normally do three useful things. It would cut withholding on dividends, interest and royalties from 30% to something like 15%, 10% or zero. It would set a "permanent establishment" threshold, so you could sell into the US without being taxed there until you had a fixed base. And it would include tie-breaker rules for people who are resident in both countries.

Without a US-UAE tax treaty, you get none of that. You are simply a non-resident alien (or a foreign corporation) under the Internal Revenue Code. If a website quotes you a "US-UAE treaty rate", treat everything else on that page with suspicion too.

The FATCA agreement is not a tax treaty

People often confuse treaties with the FATCA arrangement. The US and UAE do have a Model 1 FATCA intergovernmental agreement. US Treasury treats the UAE as having an IGA in effect from 30 June 2014, and it entered into force on 19 February 2016.

Under Article 2, the UAE collects information on US reportable accounts held at UAE financial institutions and sends it to the US each year. That is why your UAE bank asks whether you are a US citizen or tax resident when you open an account.

FATCA in the UAE is a reporting agreement. It does not reduce any US tax, it does not give you a lower withholding rate, and it does not create any of the protections a tax treaty would. If you are a US citizen living in Dubai, it means the IRS can see your UAE accounts. If you are not a US person, it mostly means more paperwork at account opening.

How the US taxes a UAE resident without a treaty

The US sorts a non-resident's income into two main buckets, plus a set of exemptions.

FDAP income (fixed, determinable, annual or periodical) covers US-source dividends, interest, royalties, rents and compensation that are not connected with a US trade or business. It is taxed at a flat 30% of the gross amount, with no deductions, and is usually withheld at source. So dividends from a US C-corp paid to a UAE resident carry 30% withholding. Remember the C-corp has already paid 21% federal corporate tax on its profits, so the combined federal take on distributed profit is roughly 44.7%.

Effectively connected income (ECI) is income tied to a US trade or business. It is taxed after deductions at the same graduated rates that apply to US citizens and residents. To be engaged in a US trade or business, your activity generally has to be considerable, continuous and regular. Trading stocks or securities through a US broker is not, by itself, a trade or business. But if you are a member of a partnership engaged in a US trade or business, you are treated as engaged in one yourself.

Then there are the exemptions, which are generous. Under IRS Publication 519 (2025), a non-resident present in the US for fewer than 183 days in the year pays no US tax on capital gains that are not effectively connected. Interest on deposits with US banks, where not connected with a US business, is excluded. Qualifying portfolio interest is exempt too. US real estate is the big exception: it has its own rules and you need specific advice before buying.

US LLCs owned by UAE residents

A US LLC for UAE residents is a common setup, particularly for e-commerce, SaaS and consulting businesses selling to US customers. A single-member LLC owned by a foreign person is "disregarded" for US income tax, meaning the IRS looks through it to you. If you have no US trade or business and no US-source FDAP income, there may be no US income tax to pay. That does not make the LLC tax-free, and it does not mean there is nothing to file.

For section 6038A purposes, the same LLC is treated as a corporation. It must file a pro forma Form 1120 with Form 5472 every year, even with no tax due. Reportable transactions include formation, contributions, distributions and dissolution, so even a quiet first year generates a filing. The penalty is US$25,000 per failure, plus US$25,000 for each 30 days the failure continues after 90 days from IRS notice. The forms cannot be e-filed: you mail or fax them, and extensions go on Form 7004. Our guide to Form 5472 and the pro forma 1120 for foreign-owned LLCs covers the mechanics, and you will also need the right ID, explained in EIN, ITIN or SSN for non-residents.

The UAE side is where many owners get caught out. The UAE has no personal income tax and 0% withholding, but corporate tax is 9% on taxable income above AED 375,000. Under UAE corporate tax rules, a company incorporated abroad is a UAE Resident Person if its effective management and control is in the UAE (FTA guide TPGTR1, October 2024). A US LLC run day to day from Dubai may fall into UAE corporate tax. Whether it does depends on the facts and on how the LLC is classified, so get that question answered before you start trading. For more, see home-country tax traps for US LLC owners and LLC or C-corp as a non-resident.

US estate tax: the US$60,000 threshold

US estate tax for non-residents is the rule people least expect. If a non-US-citizen, non-resident dies holding US-situs assets worth more than US$60,000, the estate must file Form 706-NA. The maximum unified credit is generally US$13,000, and the return is due nine months after death (IRS instructions for Form 706-NA, revised 09/2025). Compare that with the US$15 million exclusion available to US citizens and residents dying in 2026.

There is no estate tax treaty with the UAE to soften this, so classification of each asset matters.

• US-situs (counts): US real estate, tangible property located in the US, shares in US corporations, and debt of US persons.

• Treated as non-US (does not count): bank accounts not used in a US business, portfolio-interest securities, and certain life insurance.

A UAE resident with US$400,000 of Apple and Microsoft shares in a US brokerage account is well over the threshold. Questions to raise with an adviser: Which of my holdings are US-situs? Would holding them through a non-US structure change that, and what does that structure cost to run? Who would file Form 706-NA, and do my heirs know the assets exist?

Before you invest or set up: a short checklist

• Confirm your US tax status. Count your US days and check you are a non-resident alien, not a US resident under the substantial presence test.

• Map each income stream. Label it FDAP, ECI or exempt before you assume a rate.

• Ignore published "treaty rates". Check the IRS treaty list yourself.

• Diary the Form 5472 deadline if you own a US LLC, and budget for annual filing.

• Document where decisions are made. Board minutes, signing locations and who runs operations all feed into the UAE management and control test.

• Value your US-situs assets against the US$60,000 estate threshold.

• Choose the entity deliberately. An LLC and a C-corp produce very different results for a UAE owner.

FAQ

Will the US and UAE sign a tax treaty soon? There is no US-UAE income tax treaty in force. Check the IRS "United States Income Tax Treaties A to Z" list for the current position.

Does a UAE resident pay US tax on US LLC profits? It depends on whether the LLC is engaged in a US trade or business. If it is, the effectively connected profits are taxed at graduated US rates; if not, there may be no US income tax, though the annual Form 5472 and pro forma 1120 are still due. UAE corporate tax may also apply depending on where the LLC is managed.

Can I use another country's treaty through a holding company? Rarely in the way people hope. A treaty only helps a company that is genuinely resident in the treaty country and passes that treaty's anti-abuse rules. Most US treaties include a limitation on benefits article that tests who owns the company and what it actually does. See why a holding company may not get the treaty rate.

Do I still need to report BOI to FinCEN? No, if your company was formed in the US. FinCEN's final rule of 11 August 2026, published in the Federal Register on 14 August 2026, permanently removed beneficial ownership reporting for US-formed companies. Only entities formed outside the US and registered to do business in a US state still report, and they report only their non-US beneficial owners. Rules in this area have changed several times, so check fincen.gov before relying on this.

When should I take professional advice? Before you buy US real estate, before you receive your first US dividend or business income, and before you form an entity. Advice is cheapest at the planning stage and most expensive after a missed filing.

Without a US-UAE tax treaty, the rules are simply US domestic law: 30% on passive US income, graduated rates on business income, generous exemptions on gains and bank interest, and a low estate tax threshold. Add a strict annual filing duty for LLCs and a possible UAE corporate tax question, and the setup choice matters. If you are planning a US company from the UAE, Cosmos can coordinate the set-up and the annual US filings with our licensed US CPA partners, and the UAE corporate tax side through an FTA-registered tax agent.