By Jude Ayua
The United Arab Emirates (UAE)’s Federal Tax Authority (FTA) published amended tax regulations on 2 October 2024. The regulations introduced a value added tax (VAT) exemption to cryptocurrency and other virtual assets transactions. Effective from 15 November 2024, transfers and conversions of virtual assets will no longer be subject to VAT in the UAE.
UAE’s tax regulations amendments
The UAE’s tax regulations amendments, “Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax (Executive Regulation)” were issued following Cabinet Decision No. (100) of 2024. The amendments are aimed at enhancing clarity, providing additional details on key provisions and procedures. They further aim to align with earlier changes in the Decree-Law and other relevant tax legislation in the country. The previous tax regulations were believed to have created barriers for businesses and individuals in the virtual assets industry.
Apart from virtual assets, additional services exempt from VAT are management of investment funds. Prior to the amendments, the UAE imposed a 5% VAT on cryptocurrency transactions and other commercial transactions. However, it was difficult taxing cryptocurrency transactions because of their decentralization and anonymity.
Particularly fascinating is the fact that the FTA will be applying the VAT exemptions as effective from 1 January 2018. This retrospective application implies that individuals or businesses that have paid VAT on virtual assets transactions since 2018 could be eligible for refunds. Eligible persons may also be required to show proof of such transactions to the FTA.
With the recent amendments, the UAE is positioning itself to become the most crypto-friendly jurisdiction in the Middle East and beyond. Indeed, the country has realized the potential of the crypto industry to its economy.
Read also: FIRS commends KuCoin on 7.5% VAT on Nigerian crypto traders.
Read also: Group Urges Nigerian Regulators to Rethink Approach to VASPs
According to a Chainalysis report on crypto adoption in the MENA (Middle East & North Africa) region, the UAE’s “progressive regulatory stance… proactive and collaborative regulatory approach to crypto and web3 companies has fostered clarity around specific classes of crypto participation… attracted a diverse range of users, and solidified the UAE as a hub for DeFi and broader crypto activity.”
The report shows that “between July 2023 and June 2024, the UAE received over $30 billion in crypto, ranking the country among the top 40 globally in this regard and making it MENA’s third largest crypto economy.”
Other recent regulatory moves in the UAE
The UAE have recently been reforming their rules on virtual assets. On 9 September 2024, Dubai’s Virtual Asset Regulatory Authority (VARA) and the UAE’s Securities and Commodities Authority (SCA) agreed to mutually oversee virtual asset service providers (VASPs).
Following the agreement, VASPs in Dubai who wish to acquire a license from VARA will have the option to operate widely across the UAE, being registered with the SCA by default. VARA also requires firms promoting digital asset investments to add a disclaimer that “virtual assets may lose their value in full or in part and are subject to extreme volatility.”
Read also: UAE approves AED’s dirham-backed stablecoin.
About the Author: Jude Ayua is a policy analyst at CAB. A lawyer, Jude is an associate at Infusion Lawyers where he is a member of the Blockchain & Virtual Assets Group. He is also a member of the Policy & Regulations Committee of the Stakeholders in Blockchain Technology Association of Nigeria (SiBAN). Jude reports and writes on crypto policy and regulations. jude@infusionlawyers.com
