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The Federal Tax Authority (FTA) of the UAE has announced updates to the Executive Regulation of Federal Decree-Law No. 8 of 2017, which oversees value-added tax (VAT).
These changes, effective from November 15 following Cabinet Decision No. (100) of 2024, introduce a VAT exemption for the transfer and conversion of virtual assets, including cryptocurrencies.
Both individuals and businesses engaged in cryptocurrency transactions will now be free from VAT obligations during these processes. Additionally, Article 30 addresses the VAT treatment of goods exports, easing the conditions required for zero-rating. Exporters will be able to present various types of documentation, such as customs declarations or certificates of carriage, instead of the previously stringent requirements.
These adjustments align with the Excise Act, specifically regarding the exemption of excisable goods exported from the UAE. Article 31 modifies the VAT regulations for exported services, stipulating that exported services must not be considered as carried out within the UAE or in specific regions as defined by the Decree Law. This change effectively limits the zero-rating applicability for exported services, categorizing certain services as standard when the place of supply is within the UAE. Real estate, electronic services, and telecommunications may be affected by this, depending on their usage location.
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The most significant alteration can be found in Article 42, which pertains to the taxation of financial services. The amendment includes additional exemptions from VAT, particularly for managing investment funds, transferring ownership of virtual assets, and converting these assets. The latter two processes are now explicitly exempt from VAT, retroactively effective from January 1, 2018.
Fund managers overseeing investments should evaluate if their services qualify for this VAT exemption. For those managing UAE-licensed investment funds, activities related to fund operations, investments, and performance monitoring are now exempt from VAT. This exemption may influence the VAT recovery situation for these funds, potentially lowering investment management costs. Cryptocurrency trading businesses must assess how this exemption affects their VAT responsibilities. Those who previously paid VAT on virtual asset transactions might need to submit voluntary returns to amend their historical tax filings.