More and more entrepreneurs and freelancers are moving to Dubai to escape the high tax pressure in Europe. For a long time the United Arab Emirates were considered a tax-free paradise. But since the introduction of the new 9% corporate tax on 1 June 2023, many people are asking: are there still legal ways to do business tax free while living in the UAE?
One of the solutions often traded is: a US LLC as a "disregarded entity" for tax purposes. Agencies now sell such structures in bulk, promising that the LLC's profits are not taxed in the US and do not fall under the 9% tax in Dubai either. But does it really work that simply?
In this article we analyse the tax status of a US LLC in the context of the new corporate tax law in the United Arab Emirates.
1. The starting point: the new corporate tax in the UAE
Since 1 June 2023, the United Arab Emirates have levied a corporate tax of 9% on business profits. The rules at a glance:
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Up to a profit of AED 375,000 (~EUR 93,000) the tax stays at 0%.
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For profits above that, the 9% corporate tax applies.
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Businesses with annual revenue below AED 3 million can, under certain conditions, qualify for "Small Business Relief" and also pay 0% tax, even if their profit exceeds AED 375,000.
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Free zone companies are partly subject to special rules, but they too face increasingly strict "substance requirements".
2. The idea: a US LLC as a tax-transparent solution
In the United States, an LLC (limited liability company) with only one member (a "single-member LLC") can be run as a so-called "disregarded entity". That means:
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The LLC is not treated as a separate taxable entity.
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The profits flow directly to you as the owner, and you have to pay tax on them in your country of residence.
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No US income tax arises if you do not live in the US, have no US clients and no US withholding taxes apply.
Many providers therefore claim: "The US LLC is tax free!" And within certain limits that is true, but only from the US perspective.
3. The UAE view: when is tax due in Dubai?
The UAE look not only at where the company is registered but at its effective management (place of effective management, POEM). And this is where it gets critical:
If, as an entrepreneur living in Dubai, you manage a foreign company, such as a US LLC, from Dubai, a "permanent establishment" arises there.
What follows from that?
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From the UAE perspective, the foreign company is taxable.
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It will not matter whether it is a US LLC, a company from Estonia or another vehicle.
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The profit is then subject to the same rules as a local company, including the 9% tax above the tax-free amount.
In other words: the construction does not work if you live in Dubai permanently and run the US LLC operationally from there.
4. Are there ways out? Avoiding tax through an international presence
Some advisers now try to argue: "Then just manage the LLC from outside!"
In the Emirates, the position is in fact:
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From 90 days' presence in the calendar year, tax residence can be assumed (depending on status, even earlier).
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If you spend most of the year outside the UAE and can prove that the LLC's operational activity takes place outside Dubai, you could argue that no place of effective management arises in the UAE.
That is conceivable, but dangerous:
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The UAE authorities are increasingly tightening the requirements for proof of substance.
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If you have a residence, staff or infrastructure there, you quickly run the risk that the LLC is still considered resident in the UAE.
5. An example from practice, and what happens if you live as a nomad
Take the case of Max, an online entrepreneur:
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He moved to Dubai in 2024.
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He formed a single-member US LLC in Wyoming, treated as "disregarded".
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The LLC makes a profit of USD 500,000 a year.
Case 1: a fixed residence and operational activity in Dubai
Max lives in Dubai all year round and manages the LLC from his apartment.
From the UAE perspective: Operational management takes place in Dubai, so there is a place of effective management. The US LLC is therefore taxable in the UAE, and after deducting the tax-free amount (AED 375,000), the 9% corporate tax applies.
Case 2: the nomad model with a residence in Dubai
A year later Max changes his lifestyle: he remains tax resident in Dubai (more than 90 days' presence a year) but spends around 250 days a year as a digital nomad in various countries (Thailand, Mexico, Georgia and so on). He runs the LLC exclusively on the road, so not from Dubai.
From the UAE perspective:
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Tax residence remains (90+ days).
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The LLC's operational activity does not take place within the UAE.
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No permanent establishment arises, so there is no tax liability in the UAE.
Result: Max officially lives in Dubai but pays no tax there, because the activity takes place abroad. Whether the country he left still has a claim on that income depends on its own rules, which this article does not cover.
6. Our recommendation: caution instead of naivety
Using a US LLC as a "disregarded entity" for tax purposes can make sense, but not for everyone.
May work:
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If you are not resident in the UAE but travel regularly and can prove substance outside the UAE.
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If you make less than AED 375,000 profit a year: then you pay no UAE tax anyway.
Does not work:
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If your main residence is in Dubai and you work from home there.
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If you believe a US LLC is a tax haven in itself.
7. Consultation and contact
If you already run a US LLC or are thinking about using it as a tax-free vehicle combined with living in Dubai, let us review your situation.
We offer sound tax and structural advice on:
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Building tax-efficient company structures abroad
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Using LLCs, holdings and international structures with substance
Book a paid initial consultation now, held in English.