- VAT exemption for cryptocurrencies in UAE.
- Simplification for exporters with zero tax rate.
- Changes favor investment fund managers.
The UAE Federal Tax Authority has announced a significant change in cryptocurrency taxation, which will come into effect from November 15 this year. According to the new regulation of Federal Decree Law No. 8 of 2017, all transactions involving the transfer and conversion of virtual assets, including cryptocurrencies, will be exempt from Value Added Tax (VAT).
This decision, enacted by Cabinet Decision No. 100 of 2024, seeks not only to foster the use of cryptocurrencies in the country, but also to ease the tax burden on both citizens and companies operating in this sector. The changes also include a relaxation of the rules for exports of goods, simplifying the documentary requirements to prove exports and allowing a range of documents as evidence, such as customs declarations and shipping certificates.
Furthermore, Article 30 has been revised to address the application of the zero VAT rate on exports of goods, a change that aims to reduce the administrative burden on exporters, who previously faced a more rigorous bureaucratic process.
On the other hand, Article 31 restricts the application of the zero rate to exports of services. Now, exported services that are deemed to be carried out within the UAE or its designated zones will not benefit from this exemption.
Financial services, including cryptocurrency management, have also received special attention in the tax revisions. Article 42 specifies that services such as investment fund management, transfer of ownership of virtual assets and conversion of virtual assets are now exempt from VAT, with the exemption retroactive to January 1, 2018.
Fund managers serving investment funds licensed in the UAE will need to consider how this exemption may affect VAT recovery and costs associated with investment management.