The UAE Federal Tax Authority (FTA) has announced significant revisions to the country’s value-added tax (VAT) regulations. It provides exemptions for transactions involving virtual assets, as well as cryptocurrencies. These changes are aimed at boosting the growth of the digital asset sector in the UAE. The VAT exemptions will apply retroactively from January 1, 2018. These enable companies in the virtual asset space to recover VAT on past transactions.

New UAE VAT Rules Boost Virtual Asset Firms with Input VAT Recovery

New rules of VAT include services connected with virtual assets such as management of investment funds and acquisition or exchange of virtual assets. In PwC’s view, this represents a financial positive for virtual asset firms as it permits the companies to recover VAT on business expenses already paid. This change is expected to significantly enhance the efficiency of the businesses in the virtual asset industry by easing tax compliance.

PwC also stressed that input VAT recovery is crucial for businesses interacting with virtual assets. Any business needs to go through the previous filed tax returns to see whether the company can reclaim VAT on any of the expenses.

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Besides the changes in the VAT legislation, the UAE has been keeping on modifying its legislation regarding the virtual assets. On the 9th of September, 2024, the Virtual Asset Regulatory Authority of Dubai and the Securities and Commodities Authority signed a memorandum of understanding that will see both parties regulate VASPs. This allows VASPs in Dubai to do business anywhere in the UAE, and automatically register under the SCA.

Arab Emirates Expands Regulation on Digital Asset Marketing to Foster Growth

VARA has also scaled up its measures on the marketing of cryptocurrencies. Starting from September 26, 2024, companies that offer products that involve digital assets will require to include a clear disclaimer in the advertisement.

Finally, these changes are evidence of the UAE’s efforts to support innovation in the sphere of digital assets. Through offering favorable taxation, and increased regulation and supervision, the country is establishing a favorable climate for growth and development of blockchain and cryptocurrency businesses, in this growing field of economy.