Can a US LLC Help You Avoid Dubai's 9% Corporate Tax? Not So Fast.
Ever since the UAE introduced a federal corporate tax of 9% on business profits, digital entrepreneurs and small business owners living in Dubai have been scrambling to find legal ways to maintain a tax-free lifestyle.
Enter the US LLC.
This structure is marketed aggressively by various online agencies as the perfect solution: a "disregarded entity" in the US, tax-free locally, and supposedly outside the scope of Dubai’s 9% tax. It sounds like a dream setup. But is it really?
Let’s walk through what works, what doesn’t – and why some are unknowingly stepping into serious risk territory.
1. First, what changed in the UAE?
As of June 1, 2023, the UAE imposes a 9% corporate tax on business profits above AED 375,000 (~USD 102,000). The first AED 375,000 is tax-free. Also:
Businesses with less than AED 3 million in annual revenue can apply for Small Business Relief and potentially pay no tax at all.
Freezone companies may still qualify for 0% tax in certain cases, but the conditions have become stricter, particularly around "substance" requirements.
So the first question to ask yourself is:
Are you even affected by the tax?
If you run a small business under the AED 3 million threshold, or only make a modest profit, the panic might be unnecessary.
2. How a US LLC works – in theory
A US LLC can be treated as a "disregarded entity" for tax purposes. That means:
The LLC itself doesn’t pay US taxes.
Profits flow through to you as the owner.
If you are not a US resident and your LLC does not have US source income, you pay zero tax in the US.
This makes the LLC a powerful tool – but only from the US perspective.
The real question is: What does Dubai think?
3. The real issue: Management = Permanent Establishment
The UAE tax authorities don’t care if your company is incorporated in the US, Germany, or on Mars. What matters is where the business is managed from.
If you live in Dubai and run your LLC from your apartment, your phone, or your WeWork desk in Dubai, then the UAE considers your foreign company to be effectively managed from Dubai.
This creates a Permanent Establishment (PE) in the UAE. And that means:
Your foreign company becomes subject to UAE corporate tax just like any local entity.
This is the key point: it’s not about where the company is registered. It’s about where it’s controlled from.
And yes, even if the company is a US LLC that pays zero in the US, it can be taxed in Dubai if it is managed from there.
4. What if you manage the LLC from outside the UAE?
Here’s where things get interesting:
Let’s say you spend 120 days a year in Dubai (enough to be tax resident), but the rest of the time you’re traveling – managing your LLC from hotel rooms, Airbnbs, or coffee shops around the world.
If you can show that:
The company is not managed from within the UAE, and
You are not creating a PE anywhere else either,
Then yes – it might be possible to argue that no Permanent Establishment exists in the UAE, and your profits are not taxable there.
But that doesn’t mean you’re in the clear.
5. The hidden trap: Stateless income
There’s a growing international movement against so-called stateless income – business profits that are generated outside of any tax net.
Governments, especially in Europe, hate this.
Take Germany for example. It has a little-known rule called "erweiterte beschränkte Steuerpflicht" in §2 AStG:
If you leave Germany and within 10 years earn business income without a clear tax home (i.e., no PE elsewhere), Germany can still tax you.
So if you’re German and managing your LLC from random countries without real business substance, Germany may come knocking.
If you’re not German? You still need to check your home country’s tax rules.
6. When the US LLC actually works
Despite the risks, the US LLC can be the right structure for some entrepreneurs – under the right conditions.
✅ It might work if:
You have clear economic substance outside the UAE, such as a team or real office abroad.
You spend most of your time outside the UAE and can document that you manage your business remotely.
You earn below the UAE thresholds (AED 375k profit or AED 3m revenue).
You’re not German and not subject to anti-stateless income rules.
❌ It will not work if:
You live in Dubai and manage the LLC locally.
You have no operational footprint anywhere else.
You fall under anti-avoidance or stateless income rules (e.g., German expats).
7. Bottom line: Don't be fooled
The US LLC is a powerful tool. But it is not a magic shield against the UAE’s 9% corporate tax – and it can backfire spectacularly if used incorrectly.
If you live and work in Dubai, the LLC’s profits will likely be taxable in the UAE. And if you become a nomad and have no clear tax home, you might even face trouble in your former country.
The legal form of the entity means little. What matters is where it’s run from.
8. Need help?
I help clients structure their international business life legally and efficiently. If you’re considering a US LLC or moving to Dubai, I can review your setup and tell you what’s safe – and what isn’t.
