[NEWS] UAE tax reform to partially exempt cryptocurrency transactions

The United Arab Emirates (UAE) has announced that specific activities related to cryptocurrencies will be excluded from value-added tax (VAT), following an amendment to the executive regulations approved by the UAE Cabinet.

Nimish Goel, Partner at Dhruva Consultants, stated that cryptocurrencies are exempt from VAT, and this exemption applies to digital representations of value that can be traded or converted digitally and used for investment purposes.

The UAE Ministry of Finance has confirmed that the UAE Cabinet approved Decision No. 100 of 2024, which amends specific provisions of Federal Decree-Law No. 8 of 2017 on VAT.

The 5% VAT, introduced in January 2018, was implemented as part of a framework agreed upon by the member states of the Gulf Cooperation Council (GCC). This tax has since been applied across various sectors on goods and services.

According to Anurag Chaturvedi, CEO of Andersen in the UAE, the amendment to the VAT regulations targets cryptocurrencies and NFTs, which are defined as digitalized assets that can be traded or converted and used for investment purposes. Digitalized forms of fiat currency and financial securities, however, are not included in the exemption.

This regulatory update establishes a clear distinction regarding the types of cryptocurrencies that qualify for VAT exemption.

Chaturvedi added, "The VAT exemption covers the transfer, conversion, storage, and management of cryptocurrencies. To qualify for VAT exemption, the cryptocurrency must meet the prescribed criteria."

He further explained that this exemption applies only when these services are not offered in exchange for a fee, discount, commission, or similar remuneration.

This measure is expected to clarify taxation on cryptocurrencies, which have gained significant attention as an investment option in the UAE.

Investment Fund Management Services Also Exempt

In addition, the new amendment includes an exemption for investment fund management services. Services such as the administration of funds, investment management on behalf of the fund, and monitoring, improving, and managing fund performance will also be exempt from VAT.

This update is anticipated to support the growth of the UAE’s financial sector, attract more companies to establish investment operations in the UAE, and further solidify the country’s position as a key hub for investment activities.

Reference: Announcement
Image: Shutterstock

Related articles

Tether to issue stablecoin pegged to the UAE dirham

"TOKEN2049in Dubai" local report