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What happens if I receive or give gifts in the UAE?

If you’re a US person giving a gift to a non-US person, you’re responsible for reporting the gift to the IRS. This is done using a special form, IRS Form 709, “United States Gift (and Generation-Skipping Transfer) Tax Return.”, that tracks the amount given during your lifetime, considering the exclusion amount (around 11 million US dollars).

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For the tax year 2024, the annual gift tax exclusion is $18,000. This means a person can give up to $18,000 to as many people as they want without having to pay any taxes on the gifts. Gifts above this amount must be reported. 

Both cash and non-cash gifts like cars are included in the total amount.

Is there a difference between loans and gifts?

Loans are not treated as gifts. If you lend money with the intention of it being repaid, it’s not reported as a gift.

However, any interest income generated from the loan must be reported on your US tax return.

What happens when I receive a gift?

If you receive a gift in the form of stock or shares from a non-US person and the value of the gift, combined with your other foreign financial assets, exceeds $100,000, it triggers specific reporting requirements:

  • Reporting on Form 3520: If the total value of gifts from a non-US person exceeds $100,000, you must report it using IRS Form 3520. This includes gifts of stock or shares.
  • FBAR Filing Requirements: If the value of the gifted stock or shares, along with your other foreign financial accounts, exceeds $10,000 at any time during the calendar year, you are also required to file an FBAR (Foreign Bank and Financial Accounts Report) using FinCEN Form 114. 
  • Form 8938 Filing: Additionally, if the total value of your foreign financial assets, including the gifted stocks or shares, exceeds certain thresholds (which vary based on your tax filing status and whether you live in the US or abroad), you may need to file Form 8938, “Statement of Specified Foreign Financial Assets,” with your tax return.

It’s important to note that these reporting requirements are separate from any capital gains tax obligations that may arise if you sell the gifted stocks or shares. The capital gains would be assessed based on the holding period (short-term or long-term) and taxed accordingly.

Why partner with a specialist Expat accountant?

Living outside of the US can make your tax filing requirements complicated. To ensure you pay the minimum amount of taxes, it’s critical to work with an accountant who understands every aspect and avenue for reducing your tax liability. We have a dedicated team of tax accountants who work exclusively with US expats earning and investing in the UAE. Partnering with a specialist expat accountant can help you navigate complex tax regulations and optimize your tax situation.

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