Founders in the United Arab Emirates often form U.S. companies to access global markets, simplify payments, or appeal to investors. But forming a U.S. entity comes with tax responsibilities—even if you live in Dubai, Abu Dhabi, or elsewhere in the UAE.
Do UAE Founders Need to File U.S. Taxes?
Yes. If you’ve formed a U.S. LLC or corporation, you are required to file taxes with the IRS, even if you don’t live in the U.S. These filings depend on your business structure and income activity.
U.S. Federal Tax Obligations
What Forms You Need to File (By Entity Type)
C-Corporation
- Form 1120 – U.S. Corporation Income Tax Return
- Form 5472 – Required if your company is 25% or more foreign-owned and has reportable transactions
Single-Member LLC (Disregarded Entity)
- Form 5472 + Pro Forma 1120 – Required even if the business made no income if there are reportable transactions
Multi-Member LLC (Partnership)
- Form 1065 – Partnership tax return
- Schedule K-1 – Provided to each partner
Individual Filing
- Form 1040-NR – Required if you earn U.S.-sourced income that is effectively connected to a U.S. trade or business
What Is ECI (Effectively Connected Income)?
ECI is income tied to U.S. business activity:
- Services performed in the U.S.
- U.S.-based employees or infrastructure
- Rental or property income
Having customers in the U.S. doesn’t automatically create ECI, but operating from the U.S. likely does.
Common UAE Business Types That Must File
- SaaS companies or apps billing U.S. users
- Digital marketing or remote consulting agencies
- E-commerce businesses with U.S. fulfillment centers
- Startups seeking U.S.-based funding
U.S. Tax Culture vs. the UAE
Accounting and Privacy
Unlike the UAE where corporate taxes are still evolving and many businesses aren’t required to file public financial statements, U.S. businesses must file annual tax forms. However, U.S. tax filings are private—they are not accessible to the public.
VAT vs. U.S. Sales Tax
The UAE uses a Value-Added Tax (VAT) system—5% on most goods and services, applied at every stage in the supply chain.
In contrast, the U.S. uses sales tax, which:
- Is charged at the final point of sale
- Is set by individual states
- Applies mostly to physical goods and select services
Service-based businesses usually don’t collect U.S. sales tax. But if you sell physical goods using U.S. infrastructure, you may need to register in specific states.
Bookmate does not provide sales tax filing services.
Misunderstandings to Avoid
- If I made no income, I don’t need to file – Incorrect. You must file even with zero revenue.
- I don’t live in the U.S., so I’m exempt – If you formed a U.S. company, you must file.
State Filing Obligations
Delaware Franchise Tax (C-Corps)
- Due: March 1
- Cost: $225–$400+, depending on share count and structure
Delaware LLC Franchise Tax
- Due: June 1
- Cost: $300 flat
Wyoming Annual Report
- Due: company anniversary month (the month your business was originally registered in the state)
- Cost: Starts at $60
These are state-level requirements and must be handled in addition to your federal filings.
Do You Need an ITIN?
If you earn U.S.-sourced personal income and file Form 1040-NR, you’ll need an ITIN (Individual Taxpayer Identification Number).
Summary
If you live in the UAE and own a U.S. business, you must file U.S. federal and state tax forms every year. Even if you don’t owe tax, failure to file can lead to steep penalties.
Book your free consultation with Bookmate: Schedule Now
Let Bookmate take the stress out of U.S. compliance.
