UAE Rolls Out VAT Exemptions For Crypto Transactions
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The United Arab Emirates (UAE) is strengthening its position as a global crypto-friendly hub.
On Oct.2, the Federal Tax Authority (FTA) amended its value-added tax (VAT) rules, paving the way for upcoming VAT exemptions for cryptocurrency transfers and conversions. The new rules will take effect on Nov. 15.
The FTA said the new rules will benefit businesses and individuals dealing with virtual assets and bolster the UAE’s bid to establish itself as a global hub for digital asset firms.
The exemptions will apply retrospectively from January 1, 2018, meaning businesses that conducted cryptocurrency transactions over the past few years can reassess their VAT positions under the new rules.
PwC, a leading auditing firm, advised companies dealing with digital assets in the UAE to examine how the exemption impacts historical VAT filings.
“Businesses dealing with virtual assets should analyze the impact of the exemption on their (retrospective) VAT position, especially in respect to their input tax recovery,” PwC said. “Voluntary disclosures may be required to correct historic returns.”
Younis Haji Al Khoori, the undersecretary of the Ministry of Finance, highlighted that these changes aim to provide clarity and a smoother experience for businesses.
“These amendments help minimize misunderstandings, simplify procedures, and ultimately contribute to an improved quality of life for all,” he said.
Crypto hub
The UAE has actively sought to cultivate a reputation as a crypto-friendly jurisdiction over the past decade by implementing permissive regulations, precipitating a surge in market growth and digital asset adoption.
Recent analysis from Chainalysis found notes that the UAE received over $30 billion in crypto between July 2023 and June 2024, making it the third-largest crypto economy in the MENA region after Turkey and Saudi Arabia.
Additionally, the country hosted impressive growth in decentralized finance (DeFi) adoption. Chainalysis reported a 74% increase in the total value received by DeFi services, with decentralized exchanges (DEXs) alone surging 87% to $11.3 billion.
The UAE's journey towards becoming a crypto haven began in the mid-2010s when blockchain technology started gaining traction worldwide. In 2016, the UAE introduced the "Dubai Blockchain Strategy," outlining plans to utilize blockchain to increase government efficiency and foster the creation of a domestic blockchain industry.
In 2018, the Abu Dhabi Global Market (ADGM) introduced a comprehensive regulatory framework for cryptocurrency exchanges. In 2022, the UAE legislature established the Dubai Virtual Asset Regulatory Authority (VARA), including regulatory frameworks for Virtual Asset Service Providers (VASPs) within the city.
On Sept. 9, 2024, VARA teamed up with the Securities and Commodities Authority (SCA), the UAE's federal financial agency, to mutually supervise VASPs within the UAE. The collaboration enables VASPs operating in Dubai to service the wider UAE by acquiring a license from VARA and registering with the SCA by default.
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