Nikolas Sargeant
The United Arab Emirates (UAE) has recently amended its value-added tax (VAT) regulations to exempt cryptocurrency transfers and conversions. This change, announced by the Federal Tax Authority (FTA) on October 2, aims to make the UAE a more attractive destination for digital asset transactions.
Retrospective VAT Exemption for Virtual Assets
According to PwC, a leading business consultancy, the new rules include VAT exemptions for various services, including the management of investment funds and the transfer and conversion of virtual assets. Notably, these exemptions will be applied retrospectively from January 1, 2018. The UAE defines virtual assets as digital representations of value that can be traded or converted for investment purposes, excluding fiat currencies and financial securities.
Implications for Crypto Businesses
This regulatory change has significant implications for businesses operating in the virtual asset space. PwC advises these companies to carefully analyze the exemption's impact on their retrospective VAT position and pay special attention to input tax recovery. In the UAE, input VAT recovery allows registered businesses to claim back the VAT they've paid on eligible business purchases.
Moreover, the UAE continues to refine its regulatory framework for cryptocurrencies. Recent developments include an agreement between Dubai's Virtual Asset Regulatory Authority (VARA) and the Securities and Commodities Authority (SCA) for mutual supervision of virtual asset service providers. Additionally, VARA has implemented stricter rules on crypto marketing, requiring firms to include prominent disclaimers about the potential volatility and risks associated with virtual assets.
