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The United Arab Emirates has introduced VAT amendments that impact crypto transactions, redefining tax obligations for companies in the digital asset space. Under the new rules, businesses dealing with cryptocurrencies and other digital assets must carefully evaluate their tax positions, especially as some provisions retroactively affect transactions since 2018.
UAE’s VAT Amendments Introduce Retroactive Tax Rules for Virtual Assets
The United Arab Emirates’ Federal Tax Authority (FTA) introduced important amendments on Oct. 2 to the Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax (VAT). Through Cabinet Decision No. 100 of 2024, these changes will come into effect on November 15, 2024, and are designed to clarify key VAT provisions.
One of the most impactful areas concerns virtual assets, including their definition, tax exemptions, and implications for businesses. Companies dealing in virtual assets should thoroughly assess how these amendments will affect their VAT obligations and input tax recovery positions.
Article 42 exempts certain virtual asset-related activities from VAT, including transferring ownership and converting virtual assets. Virtual assets are defined as “a digital representation of value that can be digitally traded or converted and used for investment purposes,” with cryptocurrencies being a primary example. This definition excludes digital representations of fiat currencies or financial securities.
The exemptions for virtual asset transactions are effective retroactively from January 1, 2018, meaning businesses may need to reanalyze their VAT filings since that date. Moreover, companies involved in these transactions may need to file voluntary disclosures to correct prior returns. These changes represent a significant shift for the UAE’s taxation of digital and cryptocurrency-related transactions.
How do you think these VAT amendments will affect businesses dealing with virtual assets in the UAE? Let us know in the comments section below.