The United Arab Emirates Ministry of Finance made a series of amendments to tax laws, exempting certain cryptocurrency transactions from value added tax (VAT).
The UAE Cabinet approved a resolution to amend the Executive Regulation of Federal Decree-Law No. 8 of 2017 on value added tax (VAT). According to local media, the Federal Tax Authority (FTA) exempted certain transactions involving digital assets from taxation.
The changes apply to:
- transfer of ownership of virtual assets, including cryptocurrencies;
- conversion of virtual assets;
- management of investment funds.
These types of transactions will no longer be subject to VAT. Notably, the new rules will apply retroactively to transactions carried out from January 1, 2018, meaning that taxpayers will be able to recalculate for previous periods. Thus, crypto companies will audit their previous tax returns and claim refunds for the past six years.
Virtual assets in the UAE are defined as a digital representation of value that can be exchanged or converted and used for investment purposes. However, such transactions must be conducted without fiat currencies and securities.
According to Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, the main purpose of the amendments to the tax legislation is to stimulate the growth of the investment management sector and enhance the attractiveness of the UAE as a leading investment hub.
The UAE authorities are actively improving the regulatory framework for the digital asset sector. A cooperation agreement was recently signed between Dubai’s Virtual Assets Regulatory Authority (VARA) and the Securities and Commodities Authority (SCA) to create a unified licensing system for virtual asset service providers (VASP). In turn, the Central Bank of the United Arab Emirates (CBUAE) approved rules for the issuance of stablecoins in the region and updated requirements for licensed financial institutions (LFI) interacting with VASPs.
