In its amended regulation, the United Arab Emirates (UAE) has exempted all crypto transactions from having to pay value-added tax (VAT).
This new rule, which will take effect on Friday, November 15, applies retrospectively to crypto-related transactions from as far back as January 1, 2018.
According to a legal expert, this move further legalizes the digital asset sector in the country, bringing the crypto industry in line with traditional financial (TradFi) services.
The UAE To Exempt Crypto Transactions From VAT In November
The United Arab Emirates (UAE) has made yet another wave in the cryptocurrency industry with its new amendment to crypto regulations.
Recently, the United Arab Emirates Federal Tax Authority (FTA) has amended its value-added tax (VAT) regulations to exempt all cryptocurrency transfers and conversions from VAT.
This exemption, which was announced under Cabinet Decision No (100) of 2024, will become effective starting from November 15, 2024.
According to the statement, the amended regulations apply retrospectively to all digital asset transactions since January 1, 2018.
That means crypto-related businesses must reevaluate their VAT obligations, especially those that concern retrospective transactions.
The FTA has urged all crypto-related businesses in the country to reevaluate their VAT recovery position and compliance status and also consider the need for voluntary disclosures to rectify past returns if necessary.
The FTA released the Arabic version of the update to the public on October 2, 2024, and the English version on October 4, 2024.
That means from Friday, November 15, 2024, the 5% VAT no longer applies to the exchange of and transfer of ownership of digital assets, including cryptocurrencies.
According to a senior associate at Métis Institute, Ankita Dhawan, this move “legitimizes digital assets” and basically “classifies them in the same category as traditional financial services, most of which are already exempted from VAT.”
With this new amendment, the UAE is not only trying to make things easier for cryptocurrency users in the country but also working to encourage crypto-related investments.
UAE’s Continued Effort To Lead In Cryptocurrency Adoption
The recent VAT amendment is part of the UAE’s efforts to take the lead in cryptocurrency adoption, regulate the virtual asset sector, and attract some of the biggest crypto firms in the world to the region.
In September, the UAE attracted OKX, Binance, and other crypto exchanges into its region. Also, Tether recently announced its plan to launch a stablecoin pegged to the UAE dirham.
More recently, the Virtual Asset Regulatory Authority (VARA), which oversees digital asset activities in Dubai, updated its marketing rules for digital asset providers in the region.
The updated marketing guidelines require all crypto-related firms to disclose the risks involved in trading digital assets in their promotional or marketing materials.
To continue operations in the region, crypto-related firms must include a disclaimer clarifying the inherent risks of such investments being marketed.
According to a recent study by Henley & Partners, the UAE holds the third position in crypto adoption, following Singapore and Hong Kong.
