UAE Introduces VAT Exemption for Crypto Transactions, Effective November 2024
Starting November 15, 2024, the UAE will exempt cryptocurrency transfers and conversions from Value Added Tax (VAT). The Federal Tax Authority (FTA) has updated the Executive Regulation of Federal Decree-Law No. 8 of 2017, introducing these changes via Cabinet Decision No. (100) of 2024.
This means businesses and individuals dealing with virtual assets, including cryptocurrencies, will no longer need to pay VAT on transfers or conversions, easing the tax burden on crypto transactions.
Simplified VAT Rules for Exporters
Exporters in the UAE will also benefit from simplified VAT rules on goods and services. Under Article 30, the government has reduced the documentary requirements to qualify for the zero VAT rate. Exporters can now provide a customs declaration, shipping certificate, or commercial documentation as proof, streamlining the process and reducing paperwork. This amendment aligns with regulations from the Excise Tax law, particularly for excise goods exported outside the UAE.
Revised VAT Treatment for Exported Services
Article 31 revises the VAT rules for exported services, narrowing the criteria for applying the zero VAT rate. Services will be taxed based on where they are performed or used, meaning some services may still be subject to VAT if their place of supply is within the UAE, including sectors like real estate, electronic services, and telecommunications.
Crypto and Financial Services: New VAT Exemptions
One of the most notable changes is in Article 42, which now exempts the transfer and conversion of virtual assets, as well as the management of investment funds, from VAT. These changes have retroactive effect from January 1, 2018, allowing businesses that previously paid VAT on crypto transactions to review their tax filings and file voluntary disclosures if necessary.
Fund managers overseeing investments licensed in the UAE are also now VAT-exempt for services related to fund operations, investment management, and performance monitoring, potentially reducing the cost of managing investment funds. Businesses involved in crypto and financial services should reassess their VAT obligations and ensure compliance with the new regulations.
New Rules for Composite Supplies
Finally, Article 46 addresses the VAT treatment of composite supplies, clarifying that when a supply involves multiple components, and there is no clear principal component, VAT should be applied based on the nature of the supply as a whole. This clarification helps businesses avoid complications when calculating VAT for bundled services or products.
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